I have not been able to to find info on this subject on this site. I'm sure its somewhere. Anyone advise? Thank you?
What is your specific question?
Thanks for your reply.
In brief, 1099S-Misc for surface damages is considered as deducted from the cost basis of the property.
- Not sure where to reflect this on the 1040 - I think it is found by completing Form 4684 which is a casualty loss form.
The 1099S is when a sale occurs and also the cost basis of the property is considered.
There is a lot of internet discussion on this and I have reviewed useful articles (e.g. Gilbertz case, TX (Strasburger, LLC))
Is there discussion on this site about it?...didn't see it in any forum. Thank you.
Some ROW payments are reported on 1099-S form as proceeds from real estate. Primarily for permanent easement or for easement expected to be on place for decades (I think 30 years per IRS Regs). 1099-S revenues are reported as gross income on Schedule D (capital gains) and reduced by basis, but not below zero. Long term capital gains or short term capital gains treatment dependinh on length of time you have owned the surface. Other ROW payments will be on 1099 form as other income or rent. Watch out for any revenues reported as non-employee compensation as this is earned income to be reported on Schedule C. Ask to have this corrected back to other income. Otherwise you will have to pay self-employment taxes on Sch C income.
Thank you for your reply T'Daze and your correct. My concern this tax year is the 1099-Misc.
They sent it in Box 1 'rents' which it isn't and I requested Box 3 'other income' and they complied. It wasn't a corrected so tha's good.
This is for construction work (surface damage) on the property.
Here is my view: This is not real income - it is an adjustment to the basis of the property value. No argument there (with the IRS/State imo). However, the burden will be on me to prove that. But the question is 'where to report it on the 1040/State income tax forms?'.
I use tax software and it is very helpful and should do this. I'm discussing this issue with the tax support chat line and also on the phone; most are not versed by the adjustment to basis approach.
The tax support rep did agree with me on this approach: I believe Form 4684 'casualty/theft loss' is the way to go as the property owner can show the income from the 1099-Misc and zero out the income if it is less than (or equal to) the gain. The property owner defers the income when selling the property and pays the greater tax amount then of those capital gains of the sale.
I anticipate debate here when other's comment. Its healthy to debate it as examiners have made different rulings.
Key: check out 'Gilbertz' case (Strasburger LLC, TX) also a 'Vest vs. Commission' case.
Do you have any legal decisions or info to share? Thanks.
Do you have other mineral sites (here possibly) where this issue is discussed (1099-Misc)?
The reporting is on form 4797, sale of business property. The net gains flow to Schedule D as a long or short term gain, business losses might be deferred, depending on previous years' sales of Sec 1231 assets
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I look to the actual agreements and paperwork outlining the payments and amounts received. The supporting documentation determines where the money should be reported on the return not necessarily the 1099s received from the gas companies (because their tax reporting is a lot to be desired).
Form 4684 is not the proper place to report pipeline activity. Check out my website www.yourkovichcpa.com and the FAQs, you may find some answers to your questions.
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