Thank you for using justanswer. There have been some changes in the past few years associated with selling your personal residence. As long as you owned and lived in the home for at least 2 out of the past 5 years as your main home, you may exclude any gain on the sale up to $ 500,000 for a married couple. You do not need to purchase another property to exclude this gain, the exclusion is based solely on your owning and living in the home as your personal residence for 2 out of 5 years.
You didn't mention if the farmland your husband inherited is adjacent to your home, but if it is, and you owned and used the vacant land as part of your main home, then the gain from the sale of that land may also be excluded as long as the home and land are sold together, or if you sell the vacant land first, then you must sell the home within 2 years before or 2 years after the date of the sale of the vacant land in order to take the exclusion.
The $ 500,000 exclusion would include both the home and the land in the above scenario.
If the farmland is not part of your main home, then you must pay capital gains tax on any gain you make on the sale, but since he owned the land for well over the 1 year time limit , you would receive the more advantageous capital gains treatment (generally 15%). There is no way to postpone paying capital gains tax anymore.
Please see below :
Publication 523 (2008), Selling Your Home
Capital gains tax rates -- a look at all the variables (Page 1 of 2)
I hope this helps.
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