If you sell the land before the primary residence, it is taxable based on the proportionate share of the total basis. However, if you then sell the house within two years of the sale of the land, and the land was used as part of your primary residence, the sales can both be considered to qualify for the primary residence exclusion. You can then fille an amended return for the year you sold the land to reclaim the amount of capital gains tax paid on the sale of the land that wouldn''t have been due if both sales were treated as a single sale.
