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Whoever is paying for the easement will send you a Form 1099 at the end of the year. If you get a 1099-MISC for rental payments, you report the income on Schedule E. For a permanent easement, you get a 1099-S and use Schedule D to report capital gains.
Easement: An intangible capital asset that reflects the purchased right to use land without ownership.
To complete a 1099 S, you need to provide:Filer's name, address, telephone number.Filer's tax identification number or social security number.Transferor's TIN/SSN.Transferor's name, address.Account number.Date of closing.Gross proceeds.Address or legal description of transferred property.More items...
For tax purposes, payments to secure a temporary or term easement are generally treated as rent payments. This means they are reported on Schedule E (Form 1040), Supplemental Income and Loss. They are treated as ordinary income, but not subject to self-employment tax.
All remitters are required to complete the applicable part(s) of Form 593 and submit Sides 1-3 to the Franchise Tax Board (FTB) regardless of real estate transaction.