you are correct Turbotax and even most pro software is not designed to handle this situation. Would it be the 1/40 of the land portion of the original purchase price of the house (i.e house and land)? that's fair and equitable since I doubt any 1-foot section of your land is worth any more than any other 1-foot section.
gain from the sale of the land that has been used as part of the principal residence can use the home sale exclusion if the land sale occurs within 2 years before the sale of the dwelling unit. the land must be adjacent to the land containing the dwelling unit and meet all other requirements for qualifying for the exclusion. if you do not plan to sell your house within 2 years of selling this land, I would just report it like a stock sale. type would be E long-term gross sales proceeds but not tax basis reported to IRS. if you do plan to sell within that period and don't want to pay tax on the gain you have to use the home sale worksheet. should you then not sell the dwelling within that timeframe you will have to go back to amend the 2022 return and pay any additional taxes along with penalties and interest. even if you do intend to sell the dwelling, you can elect to forgo using part of the exclusion on the land sale. any portion used for the land sale would not be available for the dwelling sale.
