I have a client who had an easment done on his property and he received a 1099-S. Where do I report this? He did not sell the entire home but it is a decrease in basis?
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If the basis of the affected portion of the land is less than the 1099-S, gain is recognized. I assume this is not for a limited time. -
1099s
No it is not for a limited time the government put a electric post there. Also, how do you determine the basis for the area? Do you have to take the whole area and the purchase price and then figure out that portion where the easement was done on the property?Comment
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From IRS Pub 544:
Assuming you cannot separate the basis of the part of the property from the whole property, and the 1099S is less than the basis in the whole property, I would zero out the 1099S on Schedule D (assuming this is a personal residence) and reduce the taxpayer's basis in the property by the 1099S amount. If this were business property, I would do the same only zero out the 1099S on Form 4797 rather than Schedule D.Easement. The amount received for granting
an easement is subtracted from the basis of the
property. If only a specific part of the entire tract
of property is affected by the easement, only the
basis of that part is reduced by the amount
received. If it is impossible or impractical to sep-
arate the basis of the part of the property on
which the easement is granted, the basis of the
whole property is reduced by the amount re-
ceived.
Any amount received that is more than the basis
to be reduced is a taxable gain. The trans-
action is reported as a sale of property.Comment
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Thanks Bees
I knew I read that somewhere but could not find it again. I had adjusted the basis on ths home sale form in tax program but did not mark the box to report on schedule D.
Yes it is a residential home.
Thanks,
AngelitaComment
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