Return to the farm and kill the farmer to get the quest reward and experience.
If you want to turn him in, you need to avoid telling him you intend to do so. In D2:ED Carl would drop a pretty nice amulet for the start of the game, which arguably could make that quest solution worth the lesser experience compared to turning the diary in to the guards. However, in DKS the amulet he drops isn't as good.
When you talked to Carl you could have given a 'how's it going?' type of comment, which would have evoked a depressed response due to his wife leaving him. Alternately, you could have extorted money from him to keep quiet about him being a murderer, etc.
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