Understanding Schedule A (Form 1062): Section 1062 Farmland Gain Schedule Guide

1. Introduction – What is Schedule A (Form 1062)?

Schedule A (Form 1062), officially titled “Section 1062 Gain From the Sale or Exchange of Qualified Farmland Property to a Qualified Farmer,” is a specialized property reporting schedule administered by the Internal Revenue Service (IRS), an agency of the U.S. Department of the Treasury.

It is an essential attachment to Form 1062 (“Deferral of Tax on Gain From the Sale or Exchange of Qualified Farmland Property to Qualified Farmers”). Landowners use Schedule A (Form 1062) to report property-by-property transaction details, gross sales price, cost basis calculations, buyer qualification details, and land covenant recording proofs under Internal Revenue Code (IRC) Section 1062.

2. Purpose of the Form – Why Does Schedule A (Form 1062) Exist?

Under IRC Section 1062, landowners who sell agricultural farmland to active, qualified farmers can elect to defer federal capital gains taxes and pay their net income tax liability in four equal annual installments over four years.

While the main Form 1062 computes overall federal tax liabilities and 4-year installment payments, the IRS requires detailed verification for every parcel of farmland sold. The IRS must verify that the sold property meets statutory agricultural use definitions, that the buyer qualifies as an active farmer, and that a legal covenant was recorded in county land records.

Schedule A (Form 1062) serves as this mandatory property verification schedule. A separate Schedule A must be filed for **each individual sale or exchange** of qualified farmland, providing the IRS with a transparent audit trail for every parcel included in the tax deferral election.

3. Who Needs to File This Form

Schedule A (Form 1062) is completed by taxpayers who elect Section 1062 tax deferral on Form 1062. You must complete and attach a separate Schedule A (Form 1062) for each parcel of land sold if your transaction meets these criteria:

• Qualified Farmland Dispositions: You sold or exchanged real property located in the United States that was used by you (or your tenant) for active agricultural farming operations during the required statutory period.
• Sale to a Qualified Farmer: The buyer is certified as a “qualified farmer”—an individual or business entity actively engaged in farming operations who intends to cultivate the land.
• Recorded Land Covenant: An official Section 1062 agricultural land covenant has been executed and recorded in county land deeds.

4. Who Is Exempt / Not Required to File

You do not need to complete or attach Schedule A (Form 1062) if your real estate transaction falls into any of these exempt categories:

• Sales to Non-Farmers: Farmland sold to commercial real estate developers, corporations, or non-farming investors (reported on Form 4797 and Schedule D).
• No Section 1062 Election: Landowners who choose to recognize and pay 100% of their capital gains tax in the year of sale without filing Form 1062.
• Standard Section 453 Installment Notes: Seller-financed installment sales governed by IRC Section 453 (reported on Form 6252).
• Non-Agricultural Property: Sales of residential homes, commercial office buildings, or non-farm land.

5. When to File

Schedule A (Form 1062) is an annual schedule attached directly behind Form 1062, which is attached to your primary annual federal income tax return (Form 1040, Form 1120, Form 1065, or Form 1041).

It follows the exact filing deadline of your primary return. The schedule must be submitted on or before the unextended tax return filing due date (e.g., April 15 for calendar-year individual taxpayers) for the tax year in which the farmland sale took place.

6. Where and How to File

Schedule A (Form 1062) cannot be submitted as an independent, standalone form. It must be attached directly behind Form 1062 and submitted as part of your complete federal tax return package.

Taxpayers can e-file Schedule A (Form 1062) alongside Form 1062 and their primary tax return using IRS-approved tax preparation software. If paper filing, attach Schedule A directly behind Form 1062, enclose a copy of the recorded county land covenant, and mail the filing package to the specific IRS service center address as per instructions for your main return type.

7. Step-by-Step Instructions to Fill the Form

Schedule A (Form 1062) consists of four distinct parts that detail transaction sales numbers, farmland operational history, buyer qualifications, and land covenant recording data. The table below outlines the core sections on the schedule.

Form Section	Section Name	Instruction / Description
Part I	Sale & Gain Computation	Detail property street address, county, acquisition date, sale date, gross sales price, cost basis, and net recognized gain.
Part II	Qualified Farmland History	Verify that the land was actively cultivated for agricultural or farming purposes for the required statutory period prior to sale.
Part III	Qualified Farmer Information	Report buyer legal name, SSN or EIN, address, and buyer’s certification of active engagement in a farming trade or business.
Part IV	Section 1062 Land Covenant	Disclose county land recording office name, document recording reference number, and date covenant was recorded in local land deeds.

Detailed Filling Steps

1. Identify Property & Calculate Gain (Part I): Enter the physical property location, parcel identification number, and county. Report original acquisition date, sale closing date, gross sales price, selling expenses, and adjusted cost basis to determine total recognized farmland gain.
2. Verify Agricultural Use History (Part II): Confirm that the property satisfied statutory agricultural use requirements prior to sale. Describe farming activities (raising crops, livestock, dairy, or timber) conducted on the land.
3. Enter Qualified Farmer Details (Part III): Provide the buyer’s legal business name, street address, and nine-digit SSN or EIN. Attach or confirm the buyer’s written representation certifying that they are actively engaged in the trade or business of farming.
4. Disclose County Covenant Recording Data (Part IV): Enter the county land recording office name where the Section 1062 agricultural covenant was officially recorded. Enter the recording date, book/page number, or instrument document reference number.
5. Transfer Gain Total to Form 1062: Copy the final recognized gain figure from Schedule A directly onto **Form 1062, Part I**. (If selling multiple parcels, sum the gains from all attached Schedules A before transferring to Form 1062).

8. Required Documents/Information Needed Before Filling

To ensure an accurate Schedule A (Form 1062) submission, gather the following real estate and legal records before preparing the schedule:

• Real Estate Closing Statements (Form 1099-S / Settlement Statement): Official closing documentation showing gross sale proceeds, closing dates, and itemized selling expenses.
• Recorded Section 1062 Agricultural Land Covenant: Copy of the executed land covenant stamped by the county recorder of deeds showing the legal recording reference number.
• Qualified Farmer Representation Letter: Signed buyer statement confirming active farming business operations and taxpayer identification numbers (SSN/EIN).
• Property Cost Basis Ledgers: Original land purchase deeds, capital improvement records, and accumulated depreciation schedules.

9. Common Mistakes to Avoid

Errors on Schedule A (Form 1062) can cause the IRS to reject your Section 1062 election, making 100% of capital gains tax due immediately. Watch out for these frequent mistakes:

• Filing One Schedule A for Multiple Land Sales: Combining separate farmland sales onto a single Schedule A. You must complete a **separate Schedule A (Form 1062)** for every parcel or transaction.
• Omitting County Covenant Recording Numbers: Leaving Part IV blank or failing to record the Section 1062 agricultural land covenant in local county land records prior to filing.
• Incomplete Buyer Verification: Omitting the buyer’s SSN/EIN or failing to obtain written confirmation that the buyer operates an active farming business.
• Mismatched Gain Figures: Reporting gain amounts on Schedule A that contradict closing settlement statements or figures reported on Form 4797.
• Submitting as a Standalone Form: Attempting to e-file or mail Schedule A separately without attaching it directly behind Form 1062 and your primary tax return.

10. Penalties for Non-Filing or Errors

Failing to properly complete Schedule A (Form 1062) or submitting unverified farmland sales carries immediate financial consequences:

• Invalidation of Section 1062 Tax Deferral: Incomplete or unverified Schedule A forms will cause the IRS to reject your Section 1062 election.
• Immediate 100% Capital Gain Tax Acceleration: Rejection of the election voids the 4-year installment plan, causing 100% of the capital gains tax liability to become due immediately for the year of sale.
• Late Payment Penalties & Interest: Accelerated tax balances accrue failure-to-pay penalties (0.5% per month up to 25%) and compound daily statutory interest from the original return due date.

11. Related Forms or Schedules

Taxpayers completing Schedule A (Form 1062) frequently interact with these related federal tax forms:

• Form 1062: Deferral of Tax on Gain From the Sale or Exchange of Qualified Farmland Property to Qualified Farmers.
• Form 4797: Sales of Business Property.
• Schedule D (Form 1040 / Form 1120): Capital Gains and Losses.
• Form 6252: Installment Sale Income.
• Form 1099-S: Proceeds From Real Estate Transactions.

12. Frequently Asked Questions

1. What is the primary purpose of Schedule A (Form 1062)?

Schedule A (Form 1062) is used to report property-by-property details, cost basis calculations, buyer qualifications, and county land covenant recording data for each farmland parcel sold under IRC Section 1062.

2. Do I need a separate Schedule A (Form 1062) for each parcel sold?

Yes. A separate Schedule A (Form 1062) must be completed for every individual farmland transaction or parcel sold under a Section 1062 election.

3. What information is required about the buyer on Schedule A?

Part III requires the buyer’s full legal name, street address, nine-digit SSN or EIN, and certification that the buyer actively operates an agricultural farming business.

4. What is the Section 1062 land covenant required in Part IV?

It is a legally binding covenant recorded in county land deeds that restricts the sold farmland to active agricultural farming use for a specified statutory period.

5. How does Schedule A connect to main Form 1062?

Schedule A calculates the net recognized gain for an individual farmland property. The gain is transferred to Form 1062, Part I to compute total federal net tax liabilities and the 4-year installment payment schedule.

6. Can Schedule A (Form 1062) be e-filed?

Yes. Schedule A (Form 1062) can be e-filed electronically attached directly behind Form 1062 and your annual income tax return using approved tax software.

13. Conclusion – Key Takeaways

IRS Schedule A (Form 1062) is a vital property verification schedule for landowners seeking to defer federal capital gains taxes when selling working farmland to active farmers under IRC Section 1062. By accurately itemizing property sales figures, verifying the buyer’s active farming credentials, and recording the required agricultural land covenant in county land deeds, sellers protect their 4-year tax deferral election. Gather your real estate closing statements early, obtain the county covenant recording reference number, complete a separate Schedule A for each parcel sold, and e-file Schedule A alongside Form 1062 with your annual tax return.