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Tax Question On Building And Selling Spec Houses...

 
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Old 11-07-2010, 08:11 AM   #1
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Tax Question On Building And Selling Spec Houses...


I have a pretty simple question about building/selling spec houses. Lets say you built a spec in 2010. You funded the whole thing through your business. No loans. You don't sell it untill 2011.

What happens tax wise? Do you write off the expenses in 2010? Does the house get listed as inventory or a assets?

Just something I been thinking about.
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Old 11-07-2010, 08:31 AM   #2
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Re: Tax Question On Building And Selling Spec Houses...


If you operate a cash based accounting system, you write off expenses the year in which they occur.

The house is listed as unfinished business, or an asset.

What does your accountant want you to treat them as?

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Old 11-07-2010, 08:43 AM   #3
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Re: Tax Question On Building And Selling Spec Houses...


Well I havent built any spec houses yet but am planning to in the future. I havent talked about it with my accountant yet. We are in the planning stages.
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Old 11-07-2010, 09:36 AM   #4
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Re: Tax Question On Building And Selling Spec Houses...


Your accountant can give you the best advice based on your actual circumstances - but you might end up switching over to the accrual version, if so there is no going back (unless they have changed the regs) so weigh the options carefully

You might also consider setting the spec side up as a separate LLC
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Old 11-07-2010, 11:53 AM   #5
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Re: Tax Question On Building And Selling Spec Houses...


As stated it entirely depends on whether your accounting is set up as "cash" or "accrual"
And definitely consider using a separate LLC for such ventures.
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Old 11-09-2010, 10:43 PM   #6
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Re: Tax Question On Building And Selling Spec Houses...


I removed the post because I may be wrong. I built a lot of homes in 1989 and I was on the cash system at that time. I started my business with the accrual system. The accounting was very confusing and I had major tax problems.

Last edited by pcplumber; 11-10-2010 at 12:58 AM.
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Old 11-09-2010, 11:20 PM   #7
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Re: Tax Question On Building And Selling Spec Houses...


All expenses related to the spec house are delayed until it's sale. This is handled differently than working for someone. fire up the checking account and talk to an accountant or pay out the .......wallet... to the IRS BIG time
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Old 11-10-2010, 10:23 AM   #8
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Re: Tax Question On Building And Selling Spec Houses...


http://www.irs.gov/newsroom/article/...173614,00.html

This explains what you need to know. If it doesn't make sense to you, hire a CPA.
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Old 11-10-2010, 10:27 AM   #9
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Re: Tax Question On Building And Selling Spec Houses...


Quote:
Originally Posted by Five Arrows View Post
All expenses related to the spec house are delayed until it's sale. This is handled differently than working for someone. fire up the checking account and talk to an accountant or pay out the .......wallet... to the IRS BIG time
Depends on the accounting system you use. Whether it is accrual or cash based.

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