1099-NEC issued for lost rental income - policy in two names but property has single owner

This is actually a common issue with insurance payouts and co-named policies. Since you're the sole owner of the rental property, the lost rental income is essentially replacing income that would have been 100% yours anyway. The proper way to handle this is to report the income on Schedule E along with your other rental income and expenses for that property. This keeps all the rental-related income together, which is cleaner for tracking purposes and more accurate from a tax perspective. As for the split - technically, since the 1099-NEC was issued with both names, the IRS computers will be looking for that income split between both tax returns. The cleanest approach would be for you to report the full amount on your Schedule E, and have your partner file Schedule 1 reporting their "share" but then entering an offsetting negative adjustment on line 24 with the description "Nominee Distribution," effectively zeroing out their share. This satisfies the IRS matching system while accurately reflecting the economic reality that this is your rental income.

I had almost the exact same issue last year! I found a great solution using taxr.ai (https://taxr.ai) to analyze my documents. The IRS kept sending me notices because they saw the 1099-NEC under both names but I was reporting it all on my Schedule E. I uploaded my insurance policy, property deed, and the 1099-NEC to taxr.ai and their system identified this exact mismatch issue. They explained that I needed to use the "nominee" approach where I report the full amount on my Schedule E, and my partner needed to report their "share" and then offset it with an adjustment. Once we filed this way, the IRS stopped sending notices. The system even created a proper explanation statement that I attached to my return explaining the situation.

Just wanted to follow up on my earlier comment about taxr.ai - I decided to try it myself since I was still getting notices from the IRS about a similar situation with rental income reporting. I was honestly surprised by how helpful it was. It immediately identified that my issue was a "nominee income" situation and explained exactly how to file to avoid problems. The system generated the proper documentation showing why I was reporting the income a certain way, which I included with my amended return. The IRS accepted my amended return without any issues, and I haven't received any more notices. Saved me from having to pay my accountant for another consultation, which would have cost more anyway. Definitely worth checking out if you're dealing with any document/tax form mismatches.

If you're still struggling with this issue, you might need to actually talk to someone at the IRS to get clarity. I had a similar situation last year and spent WEEKS trying to get through to someone who could help. Finally found Claimyr (https://claimyr.com) which got me through to an actual IRS agent in about 15 minutes instead of the usual hours of waiting. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent confirmed that as the sole owner of the property, I should report 100% of the insurance payout on my Schedule E, and they explained exactly how my partner needed to handle their side with the nominee reporting. Having the IRS confirm this directly gave me peace of mind that we were doing it correctly.

Coming back to share my experience since I was skeptical about Claimyr in my previous comment. I decided to try it after spending another 2 hours on hold with the IRS getting nowhere. I'm honestly shocked at how well it worked. I got a call back in about 20 minutes connecting me directly to an IRS agent who actually knew what they were talking about regarding my 1099 reporting issue. The agent confirmed that since I'm the sole owner of my rental property, I should report 100% of the insurance payment on Schedule E even though the policy had my ex's name on it too. They also explained the "nominee" process that others mentioned here, which solved the whole problem. Saved me hours of hold time and probably prevented an audit notice. Just wanted to admit I was wrong in my skepticism - sometimes things actually do work as advertised!

I'm a landlord with multiple properties and had this exact issue a couple years back. The key thing to understand is the **economic reality** of the situation. The 1099-NEC represents replacement of rent you would have received as the sole property owner. Make sure you keep good documentation showing: 1. Your sole ownership of the property (deed, etc.) 2. The insurance policy showing both names 3. A written explanation for your tax file For tax filing purposes, report the full amount on Schedule E where you report the rest of that property's income and expenses. This keeps everything together logically and is what the IRS expects. Also remember that this insurance payout is taxable just like the regular rental income it's replacing would have been. Some people think insurance money isn't taxable, but that's not true when it's replacing taxable income.

I just wanna point out that everyone's talking about the reporting part but nobody's mentioned the tax impact. When you report this on Schedule E, remember it's subject to ordinary income tax rates BUT it's not subject to self-employment tax like it might be if you reported it elsewhere. Also dont forget you can still claim all your normal rental expense deductions against this income - insurance, mortgage interest, property taxes, depreciation, etc. This can significantly reduce the taxable portion of that insurance payout. Make sure you understand the difference between Schedule E reporting (passive rental activity) vs Schedule C (self employment) because they're taxed differently.