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How to report or handle a sale an easement of a land lot with a rental home that has a depreciation basis?

Level 1

A taxpayer own a rental home.

The city is expanding the road and bought a small portion of the land lot of his rental property for $25,000.00. He was issued and received form 1099-S.

1. Can I just reduce the basis of the land by the $25,000.00 the taxpayer received?

2. If I did not report the sale, would the IRS come back the the taxpayer need to report the sale?

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1 Comment 1
Level 15

1) In most cases, yes.  Unless you have a way to determine the Basis of the specific piece of land, you just reduce the Basis of the entire land.

2) Probably, so I would report it as $25,000 Sale Price with $25,000 Basis.