What would be the best way to set up for a co that buys houses, fixes them up and resells them? Would I set it up like a builder = revenue and costs not to recognized on financial stmts as inc and exp until job is completed, in this case prop sold
Correct...All costs associated with the purchase are the initial book value of the asset. All costs to fix and/or for improvements are recorded to that asset..
Thank You.
I concur - both the IRS and US GAAP require matching of revenues and expenses for this type of work. In addition, if the project is completed but hasn't been sold at year-end, I would probably show it as an inventory asset (i.e. record a journal entry to reclassify all the expenses to an inventory asset at year-end, then reverse on the first day of the year). It seems like lots of contractors/flippers have gotten into trouble this past year from this particular issue - high tax burden due to keeping an inventory of completed projects on hand in hopes that the selling price will rise in the near future.
Thank you for your answer. I wanted to hear it best from experts like you and i appreciate your time.
