Rehab funds wrapped in a HM loan are they counted as a expense?

[Donald Kellogg]

I flipped a home in Arizona and wrapped 60K rehab funds in the HM loan. Is this a expense or is it counted as a gain at close? If it is a expanse what IRS publication addresses this item?

I count cash in and cash out to see profit on project in this case around 21K My accountant says the 60K rehab wrapped in the loan since it was not part of the purchase in a gain.

[Ashish Acharya]

Originally posted by @Donald Kellogg:

I flipped a home in Arizona and wrapped 60K rehab funds in the HM loan. Is this a expense or is it counted as a gain at close? If it is a expanse what IRS publication addresses this item?

I count cash in and cash out to see profit on project in this case around 21K My accountant says the 60K rehab wrapped in the loan since it was not part of the purchase in a gain.

Ignore your loan to calculate the profit. The cash flow and the profit are two different things.  

Generally 

Profit: 

Sale Price - purchase price(Including closing cost) - rehab cost- selling expenses - interest expense on the rehab loan  = profit. 

Cashflow 

Sale proceeds - loan amount = your cashflow. 

What you do the loan is your business. Pay it off after you get the cash from the sale.  

These are very simple calculations.