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Land sale on 1099-MISC?

Forum|Forum|3 years ago
February 8, 2023
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Hello,
Using Turbotax 2022 Premier.

I sold a vacant lot in 2022, there was a long term gain from the sale. The payer (State of New Mexico) reported the sale as "Other income" on a 1099-MISC. When I enter the 1099 as "Yes, it involved an intent to earn money", it is changed to a business transaction, but it was a private transaction not business. If I enter it as "No, it didn't involve an intent to earn money", I see no way to deduct expenses. How do I enter the 1099-MISC as a private transaction and be able to deduct the purchase price of the lot?
Thank you

Best answer by DaveF1006

Yes, since this is a capital transaction you would enter the sale of your land in the following manner. Hal_Al has already answered this but there may be a few more details to add that may be of interest to you.

Go to federal>wages and income>
investment income>stocks and bonds etc.
When it asks if you received a 1099 B, say no
When it asks you information about the sale, you will enter description, date sold, date acquired, sale proceeds, basis, etc.
You will add the selling expenses in basis to reduce the capital gain of the sale.
in the holding period section, if you owned the land less than a year before selling, it is a short term transaction.
If you owned it more than a year before the sale, it is long-termed.
Continue through until you complete this section.

Now you may ask how to report the 1099 MISC. in this instance, you will not report it at all. If you have already entered this as a 1099 MISC delete it in your return because as Hal_Al mentioned, this should have been reported on 1099-S.

If you are contacted by the IRS asking information about the 1099 MISC, keep a copy of this reply. Just mention that your Turbo Tax expert advised reporting in this manner since the 1099 MISC was an improper form to report this transaction in the first place.

J

JamesG1

Does the 1099-MISC record a sale of the land? Or 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?

Please clarify.

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.

If you sold the land, the general treatment is to report the sale on IRS form 8949 / Schedule D Capital Gains and Losses.

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Hal_Al

Employee

Land sales are usually reported on a form 1099-S, not a 1099-Misc. Is there something unusual about your situation that a 1099-Misc was issued.

What expenses are you trying to deduct? Most expenses of sale are usually added to the cost basis.

Depending, on any unusual details, instead of entering at the 1099-Misc screen, in TurboTax, you should probably be entering at:

In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in Home & Business)

- Wages & Income

Scroll down to:

-Investment Income

-Stocks, mutual funds, Bonds, Other (Real estate is other)

Answer no, when asked if you got a 1099-B. then follow the interview. You will be given an opportunity to enter Expenses of sale separately

DaveF1006Answer

Yes, since this is a capital transaction you would enter the sale of your land in the following manner. Hal_Al has already answered this but there may be a few more details to add that may be of interest to you.

Go to federal>wages and income>
investment income>stocks and bonds etc.
When it asks if you received a 1099 B, say no
When it asks you information about the sale, you will enter description, date sold, date acquired, sale proceeds, basis, etc.
You will add the selling expenses in basis to reduce the capital gain of the sale.
in the holding period section, if you owned the land less than a year before selling, it is a short term transaction.
If you owned it more than a year before the sale, it is long-termed.
Continue through until you complete this section.

Now you may ask how to report the 1099 MISC. in this instance, you will not report it at all. If you have already entered this as a 1099 MISC delete it in your return because as Hal_Al mentioned, this should have been reported on 1099-S.

If you are contacted by the IRS asking information about the 1099 MISC, keep a copy of this reply. Just mention that your Turbo Tax expert advised reporting in this manner since the 1099 MISC was an improper form to report this transaction in the first place.

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

C

CWD_NM_0001Author

Thanks to everyone for your help. I was able to get the land sale entered using the method suggested by Hal_Al and DaveF1006. Much appreciated.

Carl11_2

Employee

Typically, to "earn" money, you have to actually "DO" something. You were not paid the money because you intended to "earn" it by actually "doing" anything. That question should be answered "NO".

However, I don't think it's correct to report the sale of land on a 1099-MISC. But it would be correct if what you sold was an easement, or a right-of-way on land that you own and continue to own and pay property taxes on after this transaction.

If you actually sold land and no longer have ownership of it and no longer are liable for property taxes on it, then you can't correctly report the sale by just entering the 1099-MISC data in the area of the program that asks if you have 1099-MISC income to report.

You need to give more details, so we can assure you are provided correct and valid information.