The easement - Form 1099S: This is the direction to report the proceeds. The damages were simply to replace the land back to it's original state. That portion should not be considered later when adjusting/reducing your cost basis.
Generally,
you do not report the income for granting an easement. Only reduce
your cost basis in the property by the proceeds received which you will
still do because you will not pay tax on this amount if you follow the
steps here.
Report the gross proceeds but enter your cost basis as the proceeds, so that your taxable gain is 0.
But because you got a 1099-S, the IRS will be looking for it on your tax return.
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Enter the 1099-S proceeds as follows:
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Go to Federal Taxes.
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Wages and Income.
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Investment Income.
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Stocks, Mutual Funds, Bonds, Other.
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Click on either Start or Update.
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Answer NO to Did you get a 1099-B or a brokerage statement for these sales?
- Choose 'Land' as the type of investment you sold.
- Enter the remaining details for the sale your property and continue through the onscreen questions until you get to the 'Enter Cost Information' screen.
- Click the attachment to enlarge and view
Remember to reduce the basis by the amount of the right-of-way payment only. This basis will be used when you sell the property.
