Sale of farm land in 2021. Where is it reported?

[ColeenD3]

Please see this post from @RayW7

The sale of your farm should be entered under the Schedule F, profit or loss from farming, for any piece of the farm property (and/or equipment included in the sale) that is listed in that section of the return. First, you must determine the sales price for each asset, including your home.  TurboTax Home and Business can handle this sale

You can use the fair market value (not appraised value) for each asset that was part of the sale and you can use the tax assessments to figure out the value of the land, farm buildings and home.  Once you determine the value of each asset add them together, then divide each one by the total to find the percentage.

 Use that percentage by multiplying it by the full selling price to arrive at the selling price for each asset.

for each asset.

• Search for farm income > Jump to farm income
• Edit your farm > Update farm information to select "I sold or otherwise disposed of .....in 2020"
• Go back to select Farm Assets and go through each one to mark it sold in 2020
• Click the images attached to enlarge and view for assistance

For farm assets that are no longer listed in the farm section please use these steps.

• Search for sale of business property > Jump to sale of business property
• Continue to enter your sales (includes business land if applicable)
• Click the image attached to enlarge and view for assistance.

Please use the following steps to report the sale of your home (your residence).

• Search for sale of home > Jump to sale of home

[kittysocks]

Hello, I have read your above post. I am confused about using the tax assessments for the value of the land. Do you not use the purchase price (from when I bought it) of the land? 

Thanks.

[AmeliesUncle]

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@kittysocks wrote:

Hello, I have read your above post. I am confused about using the tax assessments for the value of the land. Do you not use the purchase price (from when I bought it) of the land? 

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You are correct that you use the purchase price of the land from when you bought it.

The comment about tax assessments are if you bought or are selling both land AND buildings and the price is not specifically mentioned for each of those; the tax assessment may show how the percentage to allocate the purchase or sale between the land and buildings.

[VivanRuhan]

When farmland is sold it is treated as a capital asset unless it was used in an active farming business. The sale would normally be reported on either Form 8949 and Schedule D of your tax return. These forms calculate the gain or loss on the sale price of the property minus the adjusted basis (the Price you paid for the property plus improvements, minus depreciation if the property was used for business use). 

If the land was part of the farming business operation, any building, equipment, or depreciable improvement sold with the land needs to be reported separately on the Form 4797 for business property. This is due to the fact the IRS treats your gain from depreciated assets differently than the land. It is important to separate these amounts in your records. 

In summary: 

• Personal use or investment farmland → Report on Form 8949/Schedule D
• Business use farmland → Report land on Schedule D, report improvements on Form 4797 

For more details see IRS Publication 225 - Farmer’s Tax Guide.