1099 For Cell Tower Rent/lease

[JenMO]

Client had been receiving cell phone tower rent for several years. New company wanted spot, he negotiated terms for what he thought was rent. Instead he received a 1099 B for total of 3 years worth of rent, not money though, and he didn't receive any payment until 2012. How is the total amount reported. It wasn't a sale.

[Burke]

Whoever did the 1099 obviously did not know what they were doing. Have client contact them for a corrected one. Showing "zero.!"

[Koss]

1099-b

Who actually issued the Form 1099-B?

I don't expect you to disclose the party's name. My question is this:

Did the Form 1099-B come from the person or entity that actually paid him the money? Or did the 1099-B come from a broker, or an agent, or someone else?

It may well be an error, which is what Burke suggested.

But you probably need to ask your client some probing questions, or get on the phone with the party that issued the 1099-B.

Or better yet, ask your client to bring you the documents that were used to execute the agreement in which he is "renting" the cell tower. That's where you'll figure out what's really going on.

You'll also need to look closely at the date the agreement was executed. The income may somehow be taxable to him in 2011. If he closed the deal on December 15, 2011 but didn't get a check until January 8, 2012, he might have constructively received the income in 2011.

Again, it may be a colossal error by a clerk who simply selected the wrong form.

But I can't escape the nagging feeling that maybe there's something else going on.

Does your client own the tower? Or the land? Or both?

I'm not kidding. Sometimes the wireless carrier doesn't own the land or the tower. They only need to mount equipment on the tower.

Did your client sell a leasehold of some sort?

Did he grant an easement?

There's something about this that your client hasn't told you yet. I'm not suggesting that the client is intentionally misleading you or withholding information. He may not understand the transaction that he completed. You need to get more details.

BMK

[JenMO]

All he thinks is that he is renting the land the tower is on. He had a lawyer look at it, and I'm going to call him tomorrow for his imput. I agree, TP may not be sure what he signed, but could also be error in reporting. I'll check when they signed, but they only received 1/6 of the payment in early Jan. Don't need this problem this week ( have others, too)

[taxea]

Client had been receiving cell phone tower rent for several years. New company wanted spot, he negotiated terms for what he thought was rent. Instead he received a 1099 B for total of 3 years worth of rent, not money though, and he didn't receive any payment until 2012. How is the total amount reported. It wasn't a sale.

Report the 1099 and adjust it to zero with an explanation. Then get the idiot who issued it to issue a correction so you can report it in 2012 when the TP received the rent.

1099's are issued for rents, royalties, etc...they just jumped the gun by issuing it in 2011.

[JohnH]

I'd want to see the documents. Sounds like the client may have agreed to do something other than simply lease the property, but didn't fully understand what he was signing.

[Gary2]

Did he grant an easement?

My money is on this.

Cell phone companies don't want to be at the whim of a landlord. The landlord may sell the land, raise the rent, build something on another part of the property that would cause interference, etc. Granted, commercial leases are often written twenty or thirty years out, and who knows what new technology could make cell towers obsolete, but easements in general give better protections.

There might even be both a rental and an easement component. The rent would be to cover taxes, insurance, and incidental maintenance and inconvenience costs, while the easement could be to guarantee access rights and restricted use within the tower's fall zone.