Installment Sale of a Farm

The installment sale of a farm for one overall price under a single contract isn’t the sale of a single asset. It generally includes the sale of real property and personal property reportable on the installment method. It may also include

the sale of property for which you must maintain an inventory, which can’t be reported on the installment method. See Inventory, later. The selling price must be allocated to determine the amount received for each class of asset.

Note: You may be required to report the sale of your farm on Form 8594. For more information, see Form 8594 and its instructions.

The tax treatment of the gain or loss on the sale of each class of asset is determined by its classification as a capital asset, as property used in the business, or as property held for sale and by the length of time the asset was held. (See chapter 8 for a discussion of capital assets and chapter 9 for a discussion of prop- erty used in the business.) Separate computations must be made to figure the gain or loss for each class of asset sold. See Sale of a Farm in chapter 8.

Election to pay tax on farmland sale or exchange in installments. If you sold or exchanged farmland to a qualified farmer after July 4, 2025, you can elect to pay the net income tax liability on the sale or exchange in four equal installments. For more information, see the instructions for Schedule 2 and Schedule 3. Also see Form 1062 and its instructions.

If you report the sale of property on the