Accounting For Unequal Contract Prices For Joint Venture Purchase Of Residential Lots

[Bryan Hancock]

Scenario:

We're buying two residential lot contracts from a local wholesaler who set them up as $30k and $95k when the market values are probably (needs to be confirmed to see what is capable of being built) closer to $80k each. The contracts are not linked in any way, but we're buying both to be honest and ethical. The same parties are buying both contracts with the same contributions and distributions for cash.

The problem is that we (the joint venture parties) consider the lots to have equal value and we want to call them both worth $62.5k/lot. Our accountant claims he needs to go by what is on the HUD-1.

Questions:

1. Does anyone know how the title company may be able to balance this on the HUD-1 with some entries?

2. Are there any standard accounting journal entries we can use to legitimately show the cost basis as the same for each lot?

Note that we know this will cause issues with a construction loan and release clauses and we have that accounted for already with a local lender.