How do I report Right-of-way Roddage for a pipeline?

[bassp2]

A pipeline company has paid me a lumpsum amount for the right to install a pipeline across my property. How do I declare the payment.

[Carl]

While you will report it as income, how you report it depends on what tax reporting document the payor sends you. I would expect it to be a 1099-MISC with the amount paid to you reported in box 3. But I could be wrong. So wait until you get the tax reporting document and then we can provide you more definitive information. They have until Jan 31st to mail out whatever they are going to send you.

[Opus 17 · Accepted solution]

I would consider this to be non-taxable.  They are buying the right to use your property--as such, it reduces the cost basis of your property, which may result in a higher capital gain when and if you sell, but it is not taxable now.

If you receive a 1099-MISC, you can either leave it off your tax return. or add it to your tax return as "other income", and then make a second entry for "other income" in an offsetting negative amount, maybe labeled "cost basis adjustment" or something.  That will show no net income.  If you leave the 1099 off your tax return, you will definitely get a letter asking for an explanation; if you create an offsetting entry, you only might get a letter asking for an explanation.  But either way, this is a reduction in the value of your property and is not taxable at this time.