Client received a 1099S for "sale" of easement from DOT to place a new sound wall at edge of property. How do I report?

[debbi.riordan]

I thought they were supposed to just adjust basis but due to 1099S what do we do?

[dkh · Accepted solution]

Report with the cost equal to the proceeds on 1099-S.... keep information so when/if client sells property they adjust basis by the cost applied towards the proceeds

[debbi.riordan]

Thank you so much. They also received a 1099misc for “rents” which was for compensation while the project was being completed. How do I handle that portion? 

[dkh]

You're welcome.    I'd report the 1099-MISC on Schedule E 

[debbi.riordan]

Shouldn’t that also be offset and the basis be lowered? 

[dkh]

Not how I would handle.  I would report as rent income just like the 1099 indicates it was

[PhoebeRoberts]

Surface damages don't reduce basis, no.

[debbi.riordan]

Thank you