All Forum Posts by: Percy Greyson

Sorry if my question was confusing. You guys are correct, I want to carry/forward/pass on the materials & labor expenses I have this year and 'claim' or 'account for' those items the year the home sells so it helps my tax burden on the profits.

Why would they be saying this is not really an option? I've been discussing it back and forth a couple weeks now.  I'm looking for the terminology here to share with them in case we are just confusing the lines of communication.  It sounds like what it will be called is 'basis of property' ? So that I don't say "Hey, this year I spent $150k, took in $0 income"  when I file taxes, and can then say next year "Hey last year I had $150k in expenses, plus $100k this year, and sold for $300k, I want the tax to be on $50k profits..." something along these lines.

I will be in the business of building specs, doing remodels, and maybe customs. So it is not a one time deal, so I need to figure out the terms and rules.

Okay so been talking to a CPA and they are telling me that I can't take a previous year's expenses and apply them to the year a spec home is built because I run on cash accounting.  I want to know what my options are so that the year the home is sold, I don't have a huge tax burden.  It may take me a full year to build a house and if I start it in the spring of 19 and sell it spring of 20 that is 9 months of expenses in 19 that just .... do what?

Here's an example.  Say I start a home in June this year, but sell it May of next year.  Say I have $150k in expenses this year, and will have $100k in expenses next year, and also sell it for $300k next year.  I have no income for this year while I am working on the house, so I have no need for the deductions this year, but I want to take the $150k in expenses this year and apply it to the cost of the home built and sold in May 2020.

How can I do this where I can then go do a remodel job say in June of next year, and maybe start a spec home again in 2021 or 2022, I won't be building spec homes only so I don't think that there is a good method to just 'keep going' and use the start of the new spec homes expenses against the sale of the one previously as that could be a year or two apart.

I am not sure which Forum Category to place this, please move it if needed!

Preface: I am in the midwest. Our median income is in the 45 to 50k range.  So in terms of numbers I am far from talking about million dollar homes.

I have five lots I purchased earlier this year. They are all similar lots that I figure I will just take the sum of the 5 lots price and split it by 5 when calculating the cost of the lots.

I do not have an LLC but am planning on forming one during the construction of the first home, probably smart to do it before the first home starts but that may not happen due to schedules. I already own many tools from building past homes and doing construction. I have an office in my home that I do a lot of research, emailing, ordering, book keeping, etc from.

Right now I have a few big questions that I can't seem to get answers for.  BP looks like the best source with people who are up to date on these topics.

1.) I know I need to form my LLC. I have one partner, my brother. He has no desire for the business side of work. He is into the physical work and does not want to learn how to do taxes or bookkeeping or really any of that. In fact, I typically do his taxes for him in trade for some help, but in the past he has always had a W2 job. This LLC I am starting is a new career for me and potentially him depending on how the first home works out. I am trying to figure out if I should make the LLC my own sole owner business or if it should be a partnership LLC. Which one will save on taxes, if at all? And secondly, which one will be less paperwork in combined hours? What I mean is if I continue to help him with his taxes, then just because I only do LLC taxes for myself that still means I am doing his own taxes as if he were an independent contractor. To me it sounds like partnership LLC may still be more tax work because even after the LLC settles the books, he and I still have our own 1040's to file showing the income from the LLC. Am I wrong in thinking this? I realize a single owner LLC is basically invisible to the IRS and that it's all done with the 1040 and schedule C for myself.

2.) What is the proper way to add materials I purchase for the home build to the cost basis of the home, especially if I buy them before a.) breaking ground or b.) a calendar year before the home is finished and sells? i.e. buying materials Spring 2019 but home isn't on market until late Spring of 2020? I feel like I am missing a certain tax form used for spec homes and I can't seem to figure out what form it is. It doesn't seem as simple as keeping receipts for the two calendar years and then adding those into the 'cost basis' of the home after it sells to determine profit? I am aware there are two different types of expense; expense in materials, and expense in things like hiring a sub-contractor, or paying builder's risk insurance or LLC liability insurance...

3.) Can I help lower my tax burden with tools I already own and store at home?

I feel like these should be three separate posts but they all sort of mingle together and I think future readers will benefit from all discussion.  I have not found a local CPA who is familiar with each variety of these questions and they seem to be more old-school as in not aggressive about finding tax savings the way this community seems to be.  

I am not sure which Forum Category to place this, please move it if needed!

Preface: I am in the midwest. Our median income is in the 45 to 50k range.  So in terms of numbers I am far from talking about million dollar homes.

I have five lots I purchased earlier this year. They are all similar lots that I figure I will just take the sum of the 5 lots price and split it by 5 when calculating the cost of the lots.

I do not have an LLC but am planning on forming one during the construction of the first home, probably smart to do it before the first home starts but that may not happen due to schedules. I already own many tools from building past homes and doing construction. I have an office in my home that I do a lot of research, emailing, ordering, book keeping, etc from.

Right now I have a few big questions that I can't seem to get answers for.  BP looks like the best source with people who are up to date on these topics.

1.) I know I need to form my LLC. I have one partner, my brother. He has no desire for the business side of work. He is into the physical work and does not want to learn how to do taxes or bookkeeping or really any of that. In fact, I typically do his taxes for him in trade for some help, but in the past he has always had a W2 job. This LLC I am starting is a new career for me and potentially him depending on how the first home works out. I am trying to figure out if I should make the LLC my own sole owner business or if it should be a partnership LLC. Which one will save on taxes, if at all? And secondly, which one will be less paperwork in combined hours? What I mean is if I continue to help him with his taxes, then just because I only do LLC taxes for myself that still means I am doing his own taxes as if he were an independent contractor. To me it sounds like partnership LLC may still be more tax work because even after the LLC settles the books, he and I still have our own 1040's to file showing the income from the LLC. Am I wrong in thinking this? I realize a single owner LLC is basically invisible to the IRS and that it's all done with the 1040 and schedule C for myself.

2.) What is the proper way to add materials I purchase for the home build to the cost basis of the home, especially if I buy them before a.) breaking ground or b.) a calendar year before the home is finished and sells? i.e. buying materials Spring 2019 but home isn't on market until late Spring of 2020? I feel like I am missing a certain tax form used for spec homes and I can't seem to figure out what form it is. It doesn't seem as simple as keeping receipts for the two calendar years and then adding those into the 'cost basis' of the home after it sells to determine profit? I am aware there are two different types of expense; expense in materials, and expense in things like hiring a sub-contractor, or paying builder's risk insurance or LLC liability insurance...

3.) Can I help lower my tax burden with tools I already own and store at home?

I feel like these should be three separate posts but they all sort of mingle together and I think future readers will benefit from all discussion.  I have not found a local CPA who is familiar with each variety of these questions and they seem to be more old-school as in not aggressive about finding tax savings the way this community seems to be.