wendybooth Posted January 19, 2008 Report Share Posted January 19, 2008 Client recieved last year setlement and file sch d for state road right-a-way. This year in December recieved another 2500 for additional right-a-way. Agent told client is not taxable but I still believe taxable on sch d. Any help would be appreciated. Quote Link to comment Share on other sites More sharing options...
jainen Posted January 19, 2008 Report Share Posted January 19, 2008 >>received another 2500 for additional right-a-way<< If he deeded a strip of property to accommodate the right-of-way, he will use Schedule D to report gain or loss according to a pro-rated share of the basis. If he merely granted an easement, he will reduce the basis and not use Schedule D (unless basis reaches zero). Quote Link to comment Share on other sites More sharing options...
wendybooth Posted January 19, 2008 Author Report Share Posted January 19, 2008 Client stated that deed was not amended from the one done last year. So I guess that is just an easement? Thanks for your quick response. Quote Link to comment Share on other sites More sharing options...
RoyDaleOne Posted January 19, 2008 Report Share Posted January 19, 2008 Does the basis of the property have to be allocated on say a per acre? Is the easement for just part of the property? Quote Link to comment Share on other sites More sharing options...
wendybooth Posted January 19, 2008 Author Report Share Posted January 19, 2008 Easement is for part of the property for telephone line being installed when the road is widened. It is a perm easement. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 19, 2008 Report Share Posted January 19, 2008 Client stated that deed was not amended from the one done last year. So I guess that is just an easement? Thanks for your quick response. If it is an easement, it should be spelled out as such in the original offer to purchase under eminent domain. If it is an easement and no land is being exchanged for the second part; I think this is ordinary income with no basis and taxed as such. Quote Link to comment Share on other sites More sharing options...
Don in Upstate NY Posted January 20, 2008 Report Share Posted January 20, 2008 The IRS says ... Easements The amount you receive for granting an easement is generally considered to be a sale of an interest in real property. It reduces the basis of the affected part of the property. If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. From Pub 551 Quote Link to comment Share on other sites More sharing options...
RoyDaleOne Posted January 20, 2008 Report Share Posted January 20, 2008 EASEMENTS AND RIGHTS-OF-WAY. Income you receive for granting easements or rights-of-way on your farm or ranch for flooding land, laying pipelines, constructing electric or telephone lines, etc., may result in income, a reduction in the basis of all or part of your farmland, or both. EXAMPLE. You granted a right-of-way for a gas pipeline through your property for $10,000. Only a specific part of your farmland was affected. You reserved the right to continue farming the surface land after the pipe was laid. Treat the payment for the right-of-way in one of the following ways. 1. If the payment is less than the basis properly allocated to the part of your land affected by the right-of-way, reduce the basis by $10,000. 2. If the payment is equal to or more than the basis of the affected part of your land, reduce the basis to zero and the rest, if any, is gain from a sale. The gain is reported on Form 4797 and is treated as section 1231 gain if you held the land for more than 1 year. See chapter 9. TIP: Easement contracts usually describe the affected land using square feet. Your basis may be figured per acre. One acre equals 43,560 square feet. IRS Farm same applies to any land. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.