Tax people out there?

[Coyote Chris]

I have a simple tax question but I dont think anyone will put the answer in writing. Without charging. A power company has an easement though a piece of land of mine. They want 25 more feet added so they can put in another line.

As far as I can tell, the price offered for the permanant easement is not taxable at the time of payment, but reduces the cost basis of the property.

"Utility easements are the more straightforward and traditional easements a residential property owner may come across. Your utility companies may need to use a portion of your property for telephone poles and wires, storm drains, electrical power lines or gas pipes below the surface. The utility companies compensate the property owner for permanent access, including possible damage to property in the contract when the easement is granted. Any payment received from a utility for permanent access easement is considered a sale of property, not treated as income or taxed in the year received. Instead, the basis of the property is decreased by the amount of the easement. This will affect the amount of annual depreciation and the capital gain subject to tax when you sell the property.
you'll get a 1099-S so this would indicate a permanent easement. while not taxable it still needs to be reported. you would show cost equal to the 1099-S amount so no gain or loss.

 

[mikesim]

I think what they are saying that the gain you receive from the utility by sale of the easement is not immediately taxable and when you sell the property, you are allowed to reduce your original basis by a like amount to offset the gain. This scheme presumes that the final sale price of your land takes into consideration the lesser value of the property due to the increase of the size of the easement. Is this what you are looking for?

Mike

 

[Coyote Chris]

I think what they are saying that the gain you receive from the utility by sale of the easement is not immediately taxable and when you sell the property, you are allowed to reduce your original basis by a like amount to offset the gain. This scheme presumes that the final sale price of your land takes into consideration the lesser value of the property due to the increase of the size of the easement. Is this what you are looking for?

Mike

That is what we are hoping. Of course, this huge 230 KV monopole tower line will dwarf the existing 115 kv lattice line and further devalue the property. We will have it reassessed to lower our taxes, but hope to die here. We may have a break. My brokerage firm CPA wants to see the contract, which I have email to her. We want to know if we get a 1099 S or what? And our tax liablility. Further, our lot is accessed at $138,000 and the power company comparred it to a piece of trash $30,000 5 acres. We have our land fire safe and cleaned up and on two paved roads and has covenents (no pig farms) We have been offered $179,000 for it as is from a Seattle firm. They can stick their offer of $1700 between our two trusts for 25 ft by 400 ft.
You may read about me in the news.....Third east lot not shown. West lot is the one in question. The only good news is that the rust colored monopoles will be off my land and just the wires will hang above our property.