Received Money from Local Watershed Council. Taxable?

[zeros]

Taxpayer received $1000 from the Local Watershed Council to install a filter strip on his land to provide better filtering of the local field runoff. His expenses were approx $200. Would this be considered taxable?

[Koss]

Nature of the Payment

There might be some sort of easement involved in this affair. Who owns the filter? And who is responsible for maintaining it?

I'm not saying that you didn't ask the right questions. But sometimes when you ask a question, the client will answer some other question, that no one has asked.

Did your client receive money to help him pay for something that he purchased and installed on his land? That sounds like some sort of grant.

Or did your client receive money because he agreed to allow someone else to install something on his land, thereby granting that party an easement?

Did he pocket $800, and actually make money on this? Or did the whole thing really cost him $1200, so that his net out-of-pocket expense was $200, after receiving the... watershed improvement grant, or whatever this thing is.

If he granted an easement, then it's not taxable. It reduces his basis in the land.

If he got $1000, and didn't give up anything in return, other than $200 in expenses, then he probably has $800 in taxable income. But I have no idea where you would report such a thing. Maybe on line 21. Is the land in question used in a trade or business? If so, that's a whole new ball of wax, because the filter can be depreciated...

BMK