As always, the tax treatment of the proceeds from any transaction should be carefully considered. We are NOT experts, certified public accountants, or tax advisors. We strongly recommend that you consult your tax advisor before entering into any such transaction. The primary question from most of our clients is whether proceeds from the lease buyout transaction will be taxed as capital gains or ordinary income. In some circumstances, clients have hired a qualified intermediary to set up an IRS Code Section 1031 exchange. They use the proceeds from the sale of an easement under the lease area to purchase or invest in another income producing real property asset. In these instances, our clients sell a perpetual easement (as opposed to a shorter 30 or 40 year term), as their tax advisors have determined that such a sale constitutes the sale of an interest in real property which is required to qualify for a 1031 exchange. You should consult your tax advisor for advice on whether this option is available to you.