client thinking about selling her farm land...help!

[Janitor Bob]

my client owns several acres of farm land that she has rented out for several years (passive rental activity). She is now thinking about selling the land. I have never dealt with a client selling anything other than their personal residence, so this will be new to me. I assume it will be as simple as deducting the basis (purchase price plus improvements) from the selling price to arrive at the lonf term capital gain.

However, client is considering selling the land on "land contract". Can you sell land only on land contract? I though I read somewhere that a land contract had to involve land plus house/building.

If she can and does do a land contract, how do I report this on her taxes? would it be some type of installment sale where so much income is reported every year?

[Elrod]

JB.... Yes she can use the installment method of sale.

SEE: http://www.irs.gov/publications/p537/index.html

[jainen]

>>Can you sell land only on land contract?<<

Yes, but details vary according to state law. Please advise your client to get QUALIFIED legal help. It seems attractive to keep title until paid in full, but actually it may be impossible to get rid of buyers who refuse to pay. If she simply sells the property and carrys back a mortgage, she could at least foreclose on a default.