I sold my house, but leased out the land. Do I still take the $500,000 exclusion for my home sale? How do I treat the land if I sell it down the road? Thank you .

[new-lease]

I've created a long term land lease for the buyers' of my house. I want to get income on it. In the future, if I decide to sell the land too, would that be all capital gains? Since it would be an investment property and not my home, could I do a 1031 exchange? Thank you .

[DDollar · Accepted solution]

You can still use the exclusion for the sale of your primary residence.  You will have to adjust your basis in the property so that it only includes the structure and not the land.  As for the land, you now have a rental property.  You would set it up as rental real estate, just like you would a rental house, only you will not set up an asset to depreciate.  Your basis remains the same as what you paid for it.  When you sell it, you will realized a gain or loss on the sale of a rental property.