A great article on the tax treatment of payments for Pipeline Easements


  • Easements and land leases are common in energy exploration and development, including pipeline construction. They are often obtained through eminent domain proceedings.
  • Whether a transaction granting a person or entity the right to use property results in capital gain or ordinary income depends on whether it is treated as an easement or as a lease of or license to use land.
  • The tax treatment of the sale of an easement differs depending on whether the property owner retains substantial rights to use the easement tract.
  • Easement agreements often include provisions for the payment of severance damages to land retained by the owner that can be offset against the basis of the land.
  • Amounts received under condemnation or threat of condemnation may qualify for nonrecognition of gain if they are reinvested as provided in Sec. 1033.

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Thanks Eric,

Excellent Article. This one goes in my file. 

Thanks again,



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