Where do I report the sale of farmland (share cropped, not as an operator)

[Roninroundrock]

I recently sold about 1/2 of some farmland that I own (jointly with my sister, inherited from grandfather 50 years ago).  Yes, the Capital Gains will be huge - but I am confused as to where to report it.

The Title company reported the sale of the farmland on a 1099-S.  I guess that is OK because the 1099-S is used to report "Proceeds from Real Estate Transactions", although I thought 1099-S's were used mainly for the sale of your residence.

Anyway, the farmland was not purchased as an Investment (i.e. was inherited, gifted) and we have been receiving income from the farm via the sharing of crop proceeds for the past 50 years.

In searching the Turbotax community, I have seen advice on reporting the sale in the Farm Income and Farm Rental section under Business Items OR to report it in Stocks, etc., "Other" section under Investment Income.  Is there a clear cut answer to my question of where to report the sale.  I am leaning towards the Investment Income section since it says to be used to report "Real estate, second home or land (not your main home)".

And I have a secondary question.  Even though the farmland was jointly owned, the income was not shared equally - so is it OK (even though no "formal" agreement exists) to also report the CG unequally (i.e. 60/40 or 70/30).

ron in shawnee

[ToddL99]

Report the sale in the Investment Income section of TurboTax -  see Where do I enter the sale of a second home, an inherited home, or land on my 2020 taxes? for instructions on both TurboTax Online or TurboTax Desktop versions of the program.

Yes, you can allocate the proceeds (and capital gains) in whatever proportions reflect the actual ownership. One person can report 60% of the proceeds and 60% of the cost basis on their return, and the other can report the remaining 40% (proceeds and cost basis) on their return.  Here are some sample screenshots to show what you will see in the interview.

[Roninroundrock]

Todd-

Thanks a lot - exactly the kind of confirmation that I wanted, needed.

And really thanks a lot for the screen shot BECAUSE:

It does not match the procedure in my 2020 TurboTax Deluxe - i.e. when clicking on the "Add More Sales", I get:

"Did you get a 1099-B or a brokerage statement for these sales?" - and when I click "No", after offering to let me "enter one sale at a time", I get the following screen:

I hope the screen shot made it into this Reply - I have been trouble with doing that.

Anyway, as you can see (hopefully), the information requested is identical to that in your screen shot (without the Box labels) - but everything else matches, exactly.

I haven't done the real thing yet, but let me ask - does this entry, transaction just show up on the  Form 8949 just like and along with my stock transactions.

Todd, thanks for the help - and as I said, your screen shots were a savior.

ron in shawnee

[ToddL99]

Yes, the entry will show up on the Form 8949 and Schedule D along with (and just like) your stock transactions.

[Macy522]

We sold a second home and farmland, I know how to report the home sale under investments section, but when I got to the LAND part, is says if this Land is used for a business to report it somewhere else. Well, we owned it and crop shared on it one year but never did any of the actual combining or anything, we just helped pay for the seed ect. We dont have an actual business name registered like and LLC either. So can our farmland be reported for capital gains under the Stocks, mutual funds, bonds or other investments as PERSONAL property? Or does it have to be done somewhere else as property used for a business? I got two different answers from Turbotax Live agents so I am here to double check.

[PatriciaV]

@Macy522 

Yes, the sale of the farm land would be reported under Investment Income >> Stocks...Other.

Since you didn't have an ongoing farm with other assets to sell, entering this sale under Investments is the most logical. Where you report capital gains from sales other than stock isn't as important as actually reporting the sale and paying the income tax.

[Macy522]

Bless you!! I have been sitting here for hours worried about this, I was worried that if I did not select it was used for business that maybe the capital gains rates were different between personal land sale and business land sale and the capital gains amount may be figured wrong which would put me in trouble, I just want to follow the rules. SO thank you

[roninshawneeKS]

Marcy- Yes, it is that simple - particularly in your case of sharecropping and not participating in the operation of the farm..

The KEY, the SECRET is to NEVER EVER check "OPERATING a Farm" in TurboTax - that will take you places you don't want to go.

ron now in shawnee

[Macy522]

Thank you, I am now trying to figure out where to go to report that crop sharing expenses and income. Not sure what the prompts are to get there.

[DianeW777]

Enter the crop sharing is part of farm income and reported on Form 4835.

Purpose of Form. If you were the landowner (or sub-lessor) and did not materially participate (for self-employment tax purposes) in the operation or management of the farm, use Form 4835 to report farm rental income based on crops or livestock produced by the tenant.

• To enter Form 4835 Go to Federal Taxes, Income & Expenses, then scroll down and find a tab for All Income.
• Find the topic "Farm Income and Expenses" > "Farm Rental Income and Expenses" and choose Start or Update.
• Follow the screens to enter the income and expense for crop sharing

[roninshawneeKS]

Marcy- YES but be sure you are in the "Business Items" section of Turbotax - that is where you will find "Farm Income & Farm Rental" - and remember NEVER EVER check "Operating a farm".  When you click on the update, just check the "I received a share of the production from my farm rental".

The only confusing thing after that is a bunch of questions about CCC loans, income, Risk Insurance, etc - and hopefully you can avoid or handle those.  And you will eventually reach the Form 4835 table, which is what you want (NEVER a Schedule F) and that will eventually flow to Line 8 on your Form 1040.

Good Luck.

ron in shawnee

[brockkv]

For the other scenario, What is the farm is operated by you and you sell one farm and you are still farming.  Where do you report proceeds from the sale.  I have seen it suggested to list the farm as an asset and then you would report the sale of the asset.  How does this work in turbotax

[JamesG1]

The farm land can be reported on your Schedule F or Form 4835.  Add the asset to your business activity, then report the sale of the asset.

On an individual Form 1040, farm activity is reported either on a Schedule F or a Form 4835. A Schedule F is where active farmers report, and Form 4835 is for inactive farm landlords.

In TurboTax Online Self-employed,

• Go to Federal / Income & Expenses / Your income and expenses / Rentals, Royalties and Farm / Farm Income and Farm Rental.
• Click Start / Edit / Add to the right of Farm Income and Farm Rental.
• Under Your Farming Income and Expenses, scroll down to Farm Assets.
• Click Start / Update to the right.
• At the screen Farm Asset Summary, click Add an Asset.
• At the screen Tell Us More About This Farm Asset, click The item was sold, retired, stolen, destroyed, disposed of, converted to personal use, traded in, or given away.

The asset can also be reported under Sale of Business Property.  Go to Federal / Income & Expenses / Your income and expenses / Other Business Situations / Sale of Business Property.

@brockkv

[589m68a07]

How do I report sale of inherited farmland.  I've already sent the IRS 15% of the sale.  I did not operate the farm.

[PattiF]

The sale of the farm is entered in the investment sales section. 

To enter the sale of the farm:

Click on Federal > Wages & Income

1. In the Investment Income section click on the Start/Revisit box next to Stocks, Mutual Funds, Bonds, Other.  If you have already entered some investment sales, you will see a screen Here's the investment sales info we have so far.  Click on the Add More Sales link. 
2. If you haven't yet entered some investment sales, you will see a screen Did you sell any investments in 2022?  Click the Yes box.
3. On the screen,  OK, what type of investments did you sell? mark the Other box and click Continue.
4. When you get to the screen, Now we’ll walk you through entering your sale details, enter the details of the sale.  You will be able to select the type of investment in the first box [second home, land, farmland.]  
5. Enter the requested information and click Continue when done.

The sales proceeds would be the amount that you received. 

The basis for inherited property is the value on the date of death. You may be able to use the tax assessor's office or know some local real estate agents that can provide a better basis. Included in the basis will also be the selling expenses. You will need to determine the cost basis for the land. You can add the closing costs and other expenses of the farm sale to the cost basis.

Other expenses like improvements and charges listed on the settlement statement are added to the basis. The bigger your basis, the smaller your capital gain, and that means less tax.

And some expenses that are listed on the settlement statement can be added to the basis. These include:

• Title fees
• real estate commissions
• documentary stamps
• credit report costs
• costs of an abstract
• transfer taxes
• home inspection
• flood certificate
• attorney fees, etc.