Farmland sold

[JenMO]

New client, came from a local cpa firm, they sold acres of farmland on the 4797 at a loss, and took all off currently on the 1040. I have always treated farmland (used for farming, raising cattle, crops) as a capital asset , reported sales on Sch D and gain treated as Cap Gain, and losses limited to $3000 each year. I've done this for years, and now I see a highly rated cpa doing it another way. Have I been wrong all these years?

[Roland Slugg]

Yes, you have. Farmland is not a capital asset. It is §1250 property and when sold is reported on F-4797, resulting in §1231 gain (capital) or loss (ordinary).

Edit: Oops. Of course farmland is not §1250 property. But it is business property and when sold yields §1231 gain or loss. That is the important point.

[JenMO]

the farmers tax guide states "Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. It includes buildings and structural components that are not section 1245 property. A fee simple interest in land is not section 1250 property because, like land it is not depreciable". I understand that only depreciable items are put on Form 4797, not non depreciable items like land

[dkss]

I am always partial to the handy dandy chart on page one of the Form 4797 instructions.

[jimmcg]

Form 4797

Based on facts given Form 4797 is where disposition should be reported.