You are here:

Tax Law (Questions About Taxes)/Tax treatment of compensation for tree removed from easement


I purchased my residence in 1988, knowing there was an existing gas pipeline easement that had been in place for about 20 years. I have never received any income from this easement until 2013.

In 2013,a gas companies that operates one of the gas lines on my property decided that one of the trees near the pipeline had grown too large and was a danger.

After squabbling with the gas company, they offered me $2000 to remove the tree, indicting they would consider it in a manner similar to destroyed crops. I don't raise trees for harvesting. This was just a beautiful, huge old tree that I felt added to the value of my property. The tree was cut down and taken away by a tree removal service.

I received a 1099 MISC with the $2000 listed in box 3 (other income). How do I report this income on my tax return? I use tax software and it's telling me to list it on line 21 on the 1040 (Prizes, awards, etc.).

Thank you.


Thanks for your question.

What you actually received was a payment for damage to your property, which is not taxable.  I would suggest that you enter it on line 21 of the 1040 as the software is telling you.  But in addition, I would make a second entry on line 21 with a negative $2,000 indicating it as damages to property.  This will give you a zero tax effect and should satisfy the IRS.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

All Answers

Answers by Expert:

Ask Experts


John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

©2017 All rights reserved.