Sale of farmland

Yes, you are correct. First use the information below to determine the percentage of the sale that belongs to each asset. It sounds like only the land will be sold separately (outside of the assets for the farm) and the instructions below will provide the steps for you.

Use the original cost of each asset listed on depreciation, add those together then divide each one by the combined total to find the percentage of the cost for each asset.  Use that percentage times the sales price and sales expenses to find the selling price/sales expenses for each asset. If some assets no longer have a value you can use zero for those such a fence that may be deteriorated as example.

Example:  Original Cost (of each asset on your depreciation schedule)

$10,000 Land                  = 13.33% 

$50,000 Building             = 66.67%

$15,000 Tractor/Eqp       = 20%

$75,000 Total                   = 100%

Multiply each percentage times the sales price/sales expenses to arrive at each individual sales price/sales expense.

Go through each asset in the farm schedule and indicate it was Sold, then enter the required information. This will carry the appropriate amounts to the Form 4797. Some income may go to Schedule D, while any depreciation recapture will go to the 1040.

Next sell the land using the following steps, which will also be carried to Form 4797 and Schedule D

Sale of Business Property:

1. Income and Expenses at the top
2. Scroll down to Other Business Situations
   • For TurboTax Desktop: Business Income and Expenses > Less Common Business Situations
3. Select Sale of Business Property
4. Select Sales of business or rental property that you haven't already reported.
5. Answer 'Yes' to Do all of the following apply...?
6. Enter your sales information:
   1. Description of the Property (Machine Type)
   2. Sales Price/Sales Expenses 
   3. Date acquired and date sold
   4. Cost
   5. Depreciation

These steps will eliminate any duplicated income.