More than likely, enough original cost of the entire farm was allocated to the house so that the sale of the house did not result in any taxable income.

But more likely, the house was transferred into the wholly-owned C corporation via Section 351 transfer, wherein property can be transferred to a corp (any corp) in exchange for stock, tax free, if the transferors control the corp both before and after the exchange.

So........it is illogical that the transaction cost you any tax cash at time of transfer.

However.........that begs the real question.

Transferring real estate into a C corp, under any mechanism, is a            no-no..........two reasons..........it is a forever transfer that immediately prevents any wiggle room later if law changes (without potentially heavy costs to correct the situation)............and.......if left inside the C corp, there are no favorable capital gains rates as there are on the personal return.

In the USUAL situation........I would immediately cause your tax people to come up with a solution for getting that residence out of the C corp, even if an installment sale over the next 25 years........might cost some tax cash, but will be much less than the allocation of farm sales proceeds will require as payment.

If you have a lot of business years left, then lease back the house to the corp to continue the 119 meals/lodging routine.

As the years roll forward........watch the provisions of sec 121, and when you need to convert the residence to purely personal in order to qualify for 121..........do it, and forego the benefits of 119 meals/lodging for those few final years.

No such thing as perfection in the tax world.........so just grab the little apples when you can.........but STAY FLEXIBLE.