Tax question new construction

[David C.]

If I decide later to start a construction business (actively building and selling new spec houses), assuming this is taxed as ordinary income with social security, etc and treating the homes as inventory - if you build a house, then sell it, then spend that money building a second one, but don't sell it until the next year, then sell it, then build another, can you effectively push off the taxes as you are rolling the sale proceeds into new inventory costs / construction costs?  Or do you have to pay the tax on all gains regardless of whether you spend that money on building a new home?  I thought with ordinary businesses you can subtract expenses from revenue and pay tax on the end result allowing you to keep reinvesting into the business?  I'm not talking about 1031 exchange here. 

Thanks,

[Wayne Brooks]

Nope, because it is treated as inventory. Just like in a retail business when you sell a pair of jeans you report the income on that pair of jeans based on what you paid for that pair of jeans. You don’t get to deduct the price of the pair of jeans you bought to replace that pair, to sell later.