Where to input a 1099-S Easement

Forum|Forum|2 years ago
February 9, 2024
7 replies
75 views

The City purchased the front part of the land of my main home for a sidewalk project last year. The total was for less than $10,000. I have a 1099-S form to enter, and I see mixed postings about where and how this form should be entered. As far as I can tell, there are two places to enter a 1099-S in TurboTax 2023: (A) "Investment Income: Stocks, Cryptocurrency, Mutual Funds, Bonds, Other" or (B) "Less Common Income: Sale of Home." I tried both, and on (A) I pay taxes on it, and (B) says I'm exempt from paying taxes. Which one is correct? And I'm also confused about what to enter for "Cost Basis" or "Adjusted Cost Basis." One post in the forum says leave it blank, and one said to enter the same number as "selling price."

JamesG1

Level 15

Did you sell a right of way easement? Do you still own the land and still pay property taxes on the land?

Or was there an actual sale of the land and the new owner pays the property taxes on the land?

An actual sale would be reported as you explained in (A) above. The issue becomes the basis of the property sold. If you paid $40,000 for the lot and you sold off 10% of the land, then your allocated cost basis may be $4,000. However, there also may be other methods to allocate the cost basis of the land that are appropriate given your circumstances.

If you still own the land, the general treatment is that the payment is not income but reduces the basis in the land that you own. So, if you paid $40,000 for the land and received a right of way payment for $10,000, your new basis in the property is $30,000.

You still have to deal with the 1099 that was reported to the IRS. Report the income, then immediately report a minus entry for the same amount. Reference both entries as 'right of way sold - basis adjustment'.

Follow the steps below to report this income that is not reported as self-employment income.

Select Federal from the left side of the screen.
Select Wages & Income on the left side of the screen.
Scroll down to Less Common Income. Click the down arrow.
Click Start / Revisit to the right of Miscellaneous income….
Click Start / Revisit to the right of Other reportable income.
At the screen Other Taxable Income enter the description of the income.
Click Add another Miscellaneous income Item and enter the reversing entry.

View the entries at Tax Tools / Print Center / Print, save or preview this year's return / Include government and TurboTax worksheets.

The income will be listed on line 8z of the Schedule 1 Additional Income and Adjustments to Income and line 8 of the Federal 1040 tax return.

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DanTheChaseAuthor

Level 2

I sold a right of way easement.

So following your instructions and I entered:

Miscellaneous Income Item #1:

"right of way sold - basis adjustment" [amount]

Miscellaneous Income Item #2:

"right of way sold - basis adjustment" [-amount]

Line 8z of the Schedule 1 Additional Income and Adjustments to Income shows "0".

Is that correct?

DianeW777

Level 15

Yes, that is correct. As indicated by @JamesG1, this is used to reduce the cost basis of your land and is not income. The entry shows the income and the negative adjustment so that you are not questioned later about income missing on your tax return.

Schedule 1, Line 8z should show zero.

@DanTheChase

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sunnyx0r

Level 2

I am in a similar situation, except I received a 1099-MISC rather than a 1099-S.

The city put a temporary easement on a portion of my property for a road reconstruction project. Only box 1, "Rents", was filled out by the city on the 1099-MISC. When I enter the form into TurboTax, it shows as taxable income and results in an underpayment penalty for my taxes for the year. It also asks a number of questions about rental days, etc. that I don't know how to answer. Is this really taxable income?

Hal_Al

Level 15

A temporary easement is handled differently. You have taxable income. You can report it as rental income and deduct any expenses associated with the income (unlikely). If you have no expenses to deduct, I suggest you select "non business income from the rental of personal property" for "Source of 1099-Misc income", to avoid the long complicated real property rental interview.