Have client with who received $69600 in total. The accounting firm handling the 1099's etc sent 2 1099's, one a 1099S for the permanent right away in the amount of $9793 and a 1099misc for $2448.31. The remainder of $48025 they word as damages and not reportable. My research shows damages should be reported as rent/other income and are fully taxable. I have done a few of these in the last few years so have researched this issue pretty well. Any thoughts would be appreciated.
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I don't have any experience with this, but at first glance it is treated like the Easement: It first lowers the Basis of the land, and if "damages" are greater than Basis, the 'excess' becomes taxable.
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Damages may be taxable. Damages to farm pastures full of grazing grass or hay crop is income.
See IRS Oil & Gas Industry Audit Techniques Guide, page 3-16.
Jiggers, EAComment
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