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.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
