Capital Gains On Sale Of Farm Land

[Clift]

s About Taxes)/Capital gains on sale of farm land Advertisement Expert: Glenn D Schnabel - 5/27/2009

In 2009, I sold a parcel of unimproved land in Ohio that I had been renting out to a farmer and which he used as a farm.  Does the fact that I was collecting rent from the property affect how the sale is reported?  Can you please tell me what form(s) to use to report the sale?  Would it be something other than Schedule D?  Also, as a condition of the sale(a term of the sales contract), I reimbursed the buyer(the farmer) the rent that he paid to me in 2008.  (The reimbursement was done at closing.)  I reported the rent as ordinary income on my 2008 tax return.  Does the refund increase my cost basis?  Does it make sense that the rent would be reported as ordinary income in 2008 but only increase my cost basis in 2009?  Thanks for your advice.  

[Cyd]

Marie,

Refer to IRS form 4797 . The instructions show how to treat farmland with specific criteria. Part 11 less then a year. Part 1 over a year.

Yes the refund would increase your cost basis.

Yes the rent paid to you in 2008 would be considered income and the reimbursement would be added to cost basis to arrive at gain/loss.