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Until you sell the land you do not report any capital gains. The payments you received will simply reduce your basis in the land. For instance, you purchased the property for 350K and the gas company pays you 50K for easement and another 50K for damages. You spend 25K to restore the damaged property. When you sell the property you will calculate your capital gains as followed:
- your basis
- selling expenses
= capital gains.
You will calculate your basis by reducing the purchase price by the payments (350-100) and increasing it by improvements or restoration. Your adjusted basis for calcuating capital gains will be 275K (350 - 100 +25).