You'll need to sign in or create an account to connect with an expert.
Payments for utility easement sales do not get reported as income on your tax return. Instead, the payment lowers your basis in the property. That only becomes important later when you sell the land. The only time you report the payment as income is when the payment exceeds your basis in the property. Please follow this link for more information. https://www.irs.gov/publications/p544/ch01.html#en_US_2015_publink100072442
However, the buyer has reported the sale to you (and the IRS) on Form 1099S. The IRS will often send letters to the taxpayer in this situation and attempt to add the sales price to your taxable income. If this happens to you, you'll need to write back to the IRS and explain the payment was for a utility easement.
The "inducement" payment is an odd situation. Arguably, that payment is part of the easement sale, and should receive the same tax treatment as the money reported on the 1099S. If you choose to include the inducement payment in income, answer the "intent to make money" as no to avoid triggering self-employment tax on the payment.
Payments for utility easement sales do not get reported as income on your tax return. Instead, the payment lowers your basis in the property. That only becomes important later when you sell the land. The only time you report the payment as income is when the payment exceeds your basis in the property. Please follow this link for more information. https://www.irs.gov/publications/p544/ch01.html#en_US_2015_publink100072442
However, the buyer has reported the sale to you (and the IRS) on Form 1099S. The IRS will often send letters to the taxpayer in this situation and attempt to add the sales price to your taxable income. If this happens to you, you'll need to write back to the IRS and explain the payment was for a utility easement.
The "inducement" payment is an odd situation. Arguably, that payment is part of the easement sale, and should receive the same tax treatment as the money reported on the 1099S. If you choose to include the inducement payment in income, answer the "intent to make money" as no to avoid triggering self-employment tax on the payment.
Still have questions?
Questions are answered within a few hours on average.
Post a Question*Must create login to post
Ask questions and learn more about your taxes and finances.
REF531
New Member
dlbrook
New Member
azconcretecut
New Member
Kas11027
New Member
mynameismynameandonlymyname
Level 2