income from an easement

[lts12166]

My client receives 1099misc box 1 rentals income for letting his neighbor have passage across a portion of his land to access their property. would there be a difference between reporting it on line 21 vs sched e?

[ATSMAN]

My client receives 1099misc box 1 rentals income for letting his neighbor have passage across a portion of his land to access their property. would there be a difference between reporting it on line 21 vs sched e?

Does the passage way need to be maintained like getting rid of brush etc. Are there taxes on that land? If yes I would do a sch E and deduct the prorated expenses. Remember no depreciation because it is land!

[FEDUKE404]

Would use Schedule E

I agree with ATSMAN.

While there may not be much (if anything, other than a piece of the property taxes) to offset the income, NOT putting "rental" income on a Schedule E if such is reported as "rental income" on the Form 1099-MISC might result in some unexpected later surprises from those IRS computers.

You can easily call it "land rent" or "easement rental" or something comparable. Years ago I had a client with a similar scenario where a nationwide advertising firm "rented" a small amount of square footage as a base for large highway billboards. Client had no expenses of any kind, except we did snip a bit from property taxes for the Schedule E.

(I did get a chuckle out of the "you can't depreciate land" comment. While that should be a gimme, these days it might not. I've encountered folks. . .some of the tax pro type. . .who just didn't want "to mess with any depreciation" on a piece of rental property. I guess that pendulum can swing both ways. )

FE

[Roland Slugg]

Why would you even think about NOT putting it on Schedule E?

[ATSMAN]

I agree with ATSMAN.

.....

(I did get a chuckle out of the "you can't depreciate land" comment. While that should be a gimme, these days it might not. I've encountered folks. . .some of the tax pro type. . .who just didn't want "to mess with any depreciation" on a piece of rental property. I guess that pendulum can swing both ways. )

FE

About 15 yrs back a state highway cut my town in half. There are two ramps that blocked the front view of a bunch of homes and apartments. The state by eminent domain acquired a bunch of land and forced the abutters to give up 4 feet for sidewalks in certain portions along the road. There was big talk about added depreciation because of loss of view, use etc. I actually had clients demand that I depreciate their land!

[DaveinTexas]

"Truck"

I had a new client (this was a few years ago) that showed me his previous return prepared by a "good ol' boy". This good ol' boy was in his eighties (nothing wrong with that by the way) but on his Schedule E the preparer reported water royalties paid by an oil/gas company to my client. He also depreciated a truck against the income. On the Schedule E, other expenses, he hand wrote (hand written return) the words, "Truck" as the expense description and deducted about $15,000. Hilarious!

You can't make this stuff up.