We owned 72 acres our primary residence only owned one residence. We split the property after our home burned down. we sold 66 acres where the homestead was and 6 remaining acres sold to a family member. We have not replaced our residence yet currently renting temp quarters. Can we treat it as one sale it is less than 60,000 profit and we lived there almost 14 years. All occurred in year 2021. are we exempt?
It depends. Did you receive two Forms 1099-S? If so, you have two separate sales to report: 1) your homestead and 2) land held for investment. If, however, you did not receive Form 1099-S, the result of those two sales could fall under the IRS home sale exclusion.
Please see Is the money I made from a home sale taxable? for more information and instructions on how to enter this information in TurboTax.
If you need to report the second sale separately, go to Income >> Investment Income >> Stocks, etc., and choose "Land" as the type of investment. You'll need to allocate your basis (cost) between the two sales, most likely on the basis of acreage since no structures were sold.
My bet is, you had an insurance payout after the house burned down. This can potentially complicate things a bit. More-so if your state also taxes personal income. You may wish to consider professional help for this year.
Basically, you have three sales.
- The sale of the burned home to the insurance company
- The sale of 66 acres of land to one party
- The sale of 6 acres of land to another party.
actually the home was not insured and there was no payout.
More reason to let a pro help you here. For example, if you paid to clear the property after it burned down, that cost of clearing it "may" be able to be added to the cost basis of the land. Thus reducing your taxable gain on the property.
It appears you have your answer so I will summarize. The key is the Form(s) 1099-S and whether you actually received one, two or none.
If you received one, and it was for the land where the house was situated report that as your home sale.
If you received two, and one is for the 6 acres sold to a relative report that as an investment sale of land.
If you received none report only the 6 acres if you meet the home sale rules on the 66 acre sale.
Land is considered investment property if it is not part of a home sale. Land sales are reported by using the following instruction.
As indicated by @Carl, a consideration for using a professional this year could be advantageous. If you are using TurboTax Online we can help.