Purchase Property Interest From IRA

Certain IRA transactions are not permitted by the IRS. I'm not sure what your land transaction consisted of, so I will just point out the following. Please see the link at the bottom for more information. You may need to seek some guidance from your plan administrator.

Prohibited transactions in an IRA

Generally, a prohibited transaction in an IRA is any improper use of an IRA account or annuity by the IRA owner, his or her beneficiary or any disqualified person.

Disqualified persons include the IRA owner’s fiduciary and members of his or her family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).

The following are examples of possible prohibited transactions with an IRA.

• Borrowing money from it

• Selling property to it

• Using it as security for a loan

• Buying property for personal use (present or future) with IRA funds

Effect on an IRA account

Generally, if an IRA owner or his or her beneficiaries engage in a prohibited transaction in connection with an IRA account at any time during the year, the account stops being an IRA as of the first day of that year. The effect of this is the account is treated as distributing all its assets to the IRA owner at their fair market values on the first day of the year. If the total of those values is more than the basis in the IRA, the IRA owner will have a taxable gain that is includible in his or her income.

IRA

What you did with the money (other than roll it over to another retirement account which you presumably did not do) has no bearing on the reporting of this distribution.

I assume that the purchased property did not somehow end up in a retirement account.  That would be prohibited as ColeenD3 indicated.