Which Form to use?

[neilbrink]

Client sold farmland that she had been renting out since she inherited it 4 years ago.  The land was sold at a loss.  Use Form 4797, or Schedule D?

[DANRVAN]

It depends on the facts and circumstances. The courts have based decisions on how active the landlord is in managing the property., For example in DURBIN,  the land was farmed by sharecropper but court found landlord exercised no personal control or management of the farm land.  Therefore held land was not used in trade or business so ruled it was a capital loss.

On the other hand, in GOOD,  court found landlord was active in management of property leased to shareholder and therefore used in a trade or business.  In that case an ordinary loss was allowed.