Client sold 35 acres with their primary residence. They had leased 30 of the acres for years. They vacated their house in September of 2016 and sold it in February 2017. On page 11 of Pub 523 it states that if the property was not in business use at time of sale, or in the year of sale the gain does not need to be allocated. It is an exception which does not affect the gain or loss calculation. Page 6-22 of The Tax Book has a chart that says no gain allocation is required it there is no business use in the year of sale. Can anyone direct me to code, regulations, or court case where this is stated. We can not go into an audit with just Pub documentation and the general thought is converting property two years before the sale. HELP! I am trying to use the Sec 121 exclusion for the one sale. The income from the lease was less than $700 annually. Does it make a difference if it is just rental vs actual farming? I have researched this until I am blue and then found these two statements but need something more substantial to hang my license on.