Payment for Electric Transmission Line Easement

Jun 20, 2007 2 Replies
R

My question concerns when someone receives payment from a utility company in exchange for running power lines across the owners land. The land in question is a farm. As I understand it, this is a capital gain and the basis would be the basis for that portion of the land included in the easement. I that correct? Also, is it possible to use the proceeds to buy additional farm land and treat this as a Like- Kind Exchange? If so, do the proceeds need to be deposited with an intermediary or can they simply hold the funds until the purchase is complete? Thanks!



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P

wrote

I'm not going to research it for current law changes, but I remember there were provisions to do a 1031 exchange on property taken for easements, the specific client lost a portion of his land to road expansion. In that case though, the city/county actually owned the property (the right-of-way). In a utility easement I'm not sure there is actually a change of ownership, but I suppose there could be some of that where they bought the footprint for the tower. Otherwise, a payment for the running of the lines over your property, where you still retain ownership and use of the land, doesn't sound like it qualifies as a 1031 exchange. If it qualifies for a 1031 exchange, all the rules apply, and they are very strict on the intermediary rules.

-- Paul A. Thomas, CPA Athens, Georgia

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P

wrote

I'm not going to research it for current law changes, but I remember there were provisions to do a 1031 exchange on property taken for easements, the specific client lost a portion of his land to road expansion. In that case though, the city/county actually owned the property (the right-of-way). In a utility easement I'm not sure there is actually a change of ownership, but I suppose there could be some of that where they bought the footprint for the tower. Otherwise, a payment for the running of the lines over your property, where you still retain ownership and use of the land, doesn't sound like it qualifies as a 1031 exchange. If it qualifies for a 1031 exchange, all the rules apply, and they are very strict on the intermediary rules.

-- Paul A. Thomas, CPA Athens, Georgia

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