The sale of a spec home is reported under Investment Income >> Capital Gains or Losses. You must calculate your basis in the property to report the sale.
When you build a spec home, all the direct and indirect costs are accumulated. These costs are called the basis of the property and cannot be deducted until the home is sold. The costs that must be included in the basis of the home are:
- Land
- Materials
- Labor, and
- Allocated indirect costs (See table of indirect costs in the reference below)
Thus, the income is reported and the basis deducted in the year the home is sold.
See IRS Home Construction Contracts
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
