A utility company purchased a section of our property as a land easement. It was a one time lifetime easement purchase. How do I enter this ? I tried going through:Your investments and savingsAdd investmentsOtherWhat type of investment did you sell - Other I'm not sure this is right because I keep getting " Needs Review " and cannot seem to get past it. I saw some questions and answers from 2019 and 2020, but it seems Turbotax has changed some things because those answers do not seem to correlate with what I am seeing. Any help would be appreciated!

TurboTax

File with experts
File your taxes
Experts at your fingertips

An expert helps with your taxes, or does them for you
TurboTax Expert Full Service

TurboTax Expert Assist

TurboTax Self-Employed
Prior year taxes
File myself
File myself
Do it yourself

We'll guide you step-by-step
TurboTax Do It Yourself

TurboTax Self-Employed

TurboTax Desktop
TurboTax Free

Activate your product

Prior year taxes
Business
Business
Business taxes

Get your T2 corporate return done right, your way
TurboTax Business

TurboTax Business Desktop
Tax situations
Tax situations
Tax situations

Find extra guidance for your big life moves
For investors

For 25 and younger

For self-employed

For new to Canada

For life changes
Resources
Resources
Resources

Explore tax tools, get tips, and read reviews
Personal income tax calculator

RRSP savings calculator

Learning hub

TurboTax support (FAQ)

TurboTax community
Pricing

Community

Solved

1099-s Sale of Land Easement

Forum|Forum|4 years ago
February 16, 2022
2 replies
0 views

A utility company purchased a section of our property as a land easement. It was a one time lifetime easement purchase. How do I enter this ? I tried going through:

Your investments and savings
Add investments
Other
What type of investment did you sell - Other

I'm not sure this is right because I keep getting " Needs Review " and cannot seem to get past it.

I saw some questions and answers from 2019 and 2020, but it seems Turbotax has changed some things because those answers do not seem to correlate with what I am seeing. Any help would be appreciated!

TurboTax Self Employed Online

Best answer by Hal_Al

You don't usually report payment for an easement, as income. You only reduce your cost basis in the remaining property, by the amount you received, for when the property is sold in the future. But, if you got the 1099-S, it must be reported on your tax return, but it is most likely not taxable.

Report the 1099-S amount as sale proceeds, then show the same amount as your basis, for a net gain of $0. On your own records, reduce your cost basis by that amount for future sale.

TurboTax does not have an entry point for a 1099-S (other than home sale). So, In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
- “I’ll choose what I work on” Button
Scroll down to:
-Investment Income
-Stocks, mutual funds, Bonds, Other (Real estate is other)

Carl11_2

Employee

First, you need to clarify something.

Did you sell a "right of access" easement? If so, that means you still own the land and you still pay property taxes on that land. Or did you actually sell the land, meaning that you no longer own it, and therefore your property tax assessment is reduced accordingly?

nikefizAuthor

Yes, it is "Right of access" ... I will still pay taxes and own the land. They are cutting down trees to allow easier access to their utility lines.

Carl11_2

Employee

From what I'm reading, since this is a lifetime easement you'll treat it as a sale and report it as such on SCH D. Apparently, it doesn't matter that it doesn't reduce the amount of taxable land you own. But it does reduce your cost basis in the property overall, "as if" you outright sold the property. For the simplest and best write-up I can find that explains this, see https://www.bergankdv.com/resources/blog/proceeds-from-an-easement-or-right-of-way-2/

So basically, you have to figure that portion of land the money was paid for. Then figure what percentage of your original purchase price of the property applies to that portion of land the perpetual easement payment was for. That will be your cost basis. If the money you were paid exceeds that cost basis (I'm sure it will) then you have a taxable gain. You'll only pay tax on the gain.

Hal_AlAnswer

Employee

Report the 1099-S amount as sale proceeds, then show the same amount as your basis, for a net gain of $0. On your own records, reduce your cost basis by that amount for future sale.

codeman2727

No, this doesn't appear to be correct. When you do this, there's a warning at the top that, once you select "Land (other investment purpose)", it says: "If this investment was used for business (rental, business expense, farm, etc.), don't report it here. Go to the Sale of Business Property section and report this investment there." Unless Turbo Tax internal is leading us astray.

Edit: Looks like the question was for personal use whereas I'm looking for answers for rental, so the answer does actually answer the posed question, doesn't answer mine though, still looking.

KrisD15

As posted, an easement lowers the basis in the property.

Please go to your rental or farming section and select

"Sale of Property/Depreciation"

Select Yes, I want to go to my asset summary

Click Edit next to the asset which includes the land (this would most likely be the building asset)

Select Real Estate Property

Continue until you can edit the land cost and subtract the amount of the easement

If you received a 1099-MISC, you can enter that as Farm/Rental income, then subtract it out as an expense.

Mark it separate as a miscellaneous expense and title it "EASMENT REDUCED BASIS" so that it can be traced.

If you received a 1099-S, you can enter it on your personal side, then "zero it out" but it might be temperamental. You can enter the AMOUNT as Farm/Rental income and expenses it out, but there is no way to actually enter the 1099-S as income on the farm/Rental screens.

Keep the form with your tax file.

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