Form 1099S - How to treat income?

[Hamacher]

I have a client that received money from the City. They were forced to sell a couple feet of their property (primary residence) so the City could put a sidewalk in. How do they treat the income? Because they lived there for 2 out of 5 years do they have to even report the income?

Thanks in advance!

[Koss]

Easement

That's an easement. On a primary residence, the amount received is not taxable, but it reduces their basis in the residence.

Burton

[JCH]

That does sound like an easement. My understanding is that easements do reduce the basis of the property, but if a 1099-S was issued I would report it on Schedule D - basis equals proceeds.

[Hamacher]

Thanks!

Thanks for the replies... Thats what I thought but wanted to make sure.