Client did an agreement, he sold the easement to the co, they lease it out. He rec'd a 1099 for the amount of the easement, the money he receives is divided into 3 years. The Co then has a right to renew the lease at a 10% increase. Would you treat this as an installment sale? The easement money could be subtracted from basis, I think. What questions should be asked, how should this be handled?
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I need clarification. Client (A) sold easement to co (B) who lease it to (C)? and issues a 1099 to (A). (A) will receive a like 1099 for 3 years running at which time B has the right to renew the lease at a 10% increase. What doesn't make sense is it looks like (A) leased the easement to (B) for 3 years with right to renewal of the lease. And there is no (C) in this scenario. Is the lease paid monthly or yearly. Is there any interest being paid during the first 3 years (term of contract)? Do you have a copy of the contract?
If I have assessed this correctly the easement was not sold by (A) to (B) but rather, was contract leased (rented) to (B). This sounds like a Sch E to me.Believe nothing you have not personally researched and verified. -
He told me: guy came around and talked about a deal. Client had a cell tower rental to coA, then coB talked him into selling coB an easement, which my client got a 1099 for. Client is now sending the rent money from coA to coB, and coB is paying him for the easement in 3 years payments. (which is more that coA had been paying him) He's coming out ahead, but I'm not sure where to report. I have reported coA money on a sch E and then expense it out (because he is returning this money to coB in exchange for his easement payment) Clear as mud. I was wondering about putting the easement on an installment sale, and just having client report payments as he receives them. It would be cap gain, but coB sent him a 1099S.Comment
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