My clients sold home with farm for 565.000 purchased it  for 425000 in 2004 they qualify for 500,000 for  exclusion however is the farm consider income producing property where I can write off   improvements as well as closing cost.  The income is nominal probably about 1000 last year. The Improvements for the sale of the barn were 106000. Should I just write the improvements  off as a loss on the farm and transfer that amount from sch F to the 1040. the client earns close to 500,000 per year.

Thanks

cc