1099S for borrowed property?

[Possi]

My client has a 1099S for a portion of her property that the dept of transportation needed access to, for a few years.

She has details on what the money is allocated to and it includes her expenses to replace a fence that has to be destroyed, a shed that has to be destroyed or moved, trees that must come down, flowers to be replaced, etc.

They are building a road, but she will get this land back.... eventually...

What is the best way for me to treat this?

[JG EA]

Is she sure she is getting it back? In the instructions for 1099-S it says to issue for "perpetual easements". Maybe she should review the papers she signed?

[Possi]

New client

Is she sure she is getting it back? In the instructions for 1099-S it says to issue for "perpetual easements". Maybe she should review the papers she signed?

She is a new client and I'm not sure of her batting average after our interview yesterday. I popped into the msg board while she was still here. She says she will get the property back.

I feel like I need to address this on a Sch D, and take a portion of the cost of the land against it. Whether or not she gets it back, she was issued a 1099S and I believe that dictates a sale, condemnation, perpetual easement, or the like.

[jimmcg]

Get the legal documents supporting the transaction and ascertain the real facts. The facts dictate the tax treatment not any tax documents generated by a party to the contract.

[Possi]

tonight

Get the legal documents supporting the transaction and ascertain the real facts. The facts dictate the tax treatment not any tax documents generated by a party to the contract.

She said she could fax them tonight. Hold tight......

[JohnH]

Did you give her sufficient information to enable her to figure out how to fax you just the forms that result in the best tax outcome?

[Possi]

You know me...

Did you give her sufficient information to enable her to figure out how to fax you just the forms that result in the best tax outcome?

... tooooo well.......

[Possi]

New information

I just got the information from this client who was issued a 1099S and it is for a "Right of Way" so I guess that is the same as a sale of property.

Does this go on the Sch D with the cost against it?

Thanks~~~

[rjholmes]

According to Pub 544, amounts received for easements when the land is not changing owners reduce the basis of the land. I remember several years ago when a new road was being developed in our area, several people received money for right-of-way land. At that time we put it on sch d with the cost basis same as the sale amount.

[Possi]

Thanks!

I will read the pub and I THANK YOU for your response!

[veritas]

I have seen

the 1099S generated for temporary use of the property. The money was for damage done to the property not for relinquishing ownership.

[Possi]

Rights of Way

the 1099S generated for temporary use of the property. The money was for damage done to the property not for relinquishing ownership.

That was the question... and that's why I was waiting for the actual letter. I thought it was for temporary use, as the client thought.. but as I said earlier, it's a new client and she didn't seem to have both oars in the water...

The actual letter states that the DOT is 'aquiring the rights of way" for the property.

She might think she is getting the land back, but if she does, it will have a ROAD and a RETAINING WALL on it!

At least, according to the letter.

[Edsel]

Land is Gone

Possi, I believe the land is GONE. Most land has easements for public use unless it was acquired before this was customary. An easement means that the land is still owned, but encumbered. Not the same as a sale. Your situation sounds like the land was taken for a deemed "fair" price.

They can call it only a "right of way", but your client no longer has use of this property, nor any claim to it. Some "rights of way" involve the owner continuing to have some responsibility for maintenance such as "city strip mowing" , but it is still gone.

Treat it as a sale, with a goodly portion (i.e. value as highway frontage) applying as basis.

[Possi]

Thanks

An earlier message suggested the basis could be equal to the selling value. I'm sure the land is gone according to the paperwork. They paid her what the land was worth including her expense for the fence and storage shed. I have no idea what she actually paid for the land and I'm sure she has no idea either.