A taxpayer own a rental home.

The city is expanding the road and bought a small portion of the land lot of his rental property for $25,000.00. He was issued and received form 1099-S.

1. Can I just reduce the basis of the land by the $25,000.00 the taxpayer received?

2. If I did not report the sale, would the IRS come back the the taxpayer need to report the sale?