1099 from electric company

[imjulier]

I thought I saw a post about this recently on this board but I couldn't find it through the search. If anyone knows, you can just point me to that post. I have a client who received a 1099 misc from public service company because they installed electric lines on the property she owns. I think its just property with no building on it. I'm trying to figure out what to do with it? I thought I saw a post which said either to claim as income or don't claim as income and decrease basis in property. Either way, trying to figure out what shcedule to put it on....Sch E? Sch C? Thanks for input.

Julie

[kcjenkins]

Sch D, actually. Treat it as a sale of real property, taking a pro-rata share of his basis. Had a recent case just like that, where he got paid $2000 for selling right of way for a gas pipeline. His basis was easy, thank goodness, because he had inherited the land just a year ago, and had bought out a brother on his share, so we had a good FMV basis in the land. Ended up taking $93 of basis.

I attached a note to that entry, by the way, showing how I calculated it. Handy if it ever is questioned.

[jainen]

>>they installed electric lines on the property she owns<<

In my opinion, based on Rev. Rul. 70-510, payment for an easement which doesn't substantially affect taxpayer's beneficial use of the property reduces his cost basis. It is not a sale of anything.

[michaelmars]

I've had a few of these and agree with Jainen

[kcjenkins]

Well, there is a difference in a sale of land for right-of-way vs just an easement to allow access. I agree that if that was all it was, you could adjust basis. But most of these I have seen around here involve an actual quit-claim deed, so it's a reportable sale. It's all in the facts and circumstances, folks, which is what makes taxes so much FUN, right? [i've about over-dosed on FUN for now, personally. ]