Selling Ag Land with a Home: Using Section 121

Selling a farm or ranch often involves disposing of both business property – such as land, livestock and equipment – and non-business property, like a home. 

Section 121 of the Internal Revenue Code, also known as the primary residence exclusion, allows you to exclude the capital gain on the sale of your home, subject to the following conditions:

  • The home has been used as your primary personal residence for at least 2 of the last 5 years
  • The exclusion has not been used in the past 2 years
  • The exclusion is limited to $250,000 if single or married filing separately, or $500,000 on a joint tax return

Additionally, you can exclude vacant land adjacent to your home as long as that land hasn’t been used for business purposes.  

Your ranch or farm sale contract must identify a separate price for the home and adjacent land, and that price should be supported by a reasonable estimate of market value (such as a market analysis or appraisal).  For further information about selling a home with a farm or ranch, please refer to our Straight Talk guide, "Selling a Home Along with a Farm or Ranch: Using the Section 121 Exclusion." 

We've provided the information above for general educational purposes only.  It is not intended as specific tax or legal advice.  Please consult your tax advisor for specific advice regarding your particular situation.