Form 1099-S - Easement Purchase of Right of Way of Land for County Use

If the Government bought the right of way on a piece of land for some purpose (i.e. to run water or sewer lines) then the following information may be of help if this would be considered a granting of an easement.

Per IRS Publication 544 Sales and Other Dispositions of Assets, on page 3:

Easement. The amount received for granting an easement is subtracted from the basis of the property. If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received.

Any amount received that is more than the basis to be reduced is a taxable gain. The transaction is reported as a sale of property.

If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement.

If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation. See Gain or Loss From Condemnations, later.

To enter a capital gain or loss into the TaxAct program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Investment Income in the Federal Quick Q&A Topics menu to expand, click Gain or loss on the sale of investments to expand, then click Capital gain or loss (Form 1099-B).
  3. Click + Add Form 1099-B to create a new copy of the form or click Edit to review a form already created.
  4. Click Quick Entry to scroll down to answer all applicable questions or click Step-by-Step Guidance to proceed with the program interview questions.

Note. When you make this entry you would enter the date of the sale and the total sales proceeds per the Form 1099-S that you have received. To complete the transaction you will need to enter the date you acquired the property and then enter a cost or other basis so that the appropriate amount of gain is calculated. In your records, you will need to keep track of the basis of the property which will be the original purchase price minus the amount you received from the government (plus or minus any other adjustments to basis). You would use this basis amount for when or if you ever do sell the property.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.