Built a home in 2021 I knew would be selling to a client.
In 2021 received down payment and various payments.
In 2021 had many expenses.
Home sold in 2022.
I know this could be an investment sale and can add all the expenses to the home basis in 2022 to offset capital gains, but what about the income received in 2021?
Do I claim that income in 2021, and if so can I grab some of those expenses to offset the taxes?
Save the remaining expenses and apply to the home basis in 2022 for lower capital gains?
Everything is reported on your 2022 tax return. The money you received, in 2021, was not constructively received in 2021, and should not be reported on your 2021 tax return. The money was just a "deposit" until the deal was finalized.
If the deal with client had fallen through and you were allowed to keep some of the money, paid in 2021, you would then have to file an amended 2021 return, to report the income.
That assumes that reporting the sale as an investment sale is the correct method. If it shoulda been reported as business income, the answer might be different.
For more info, in making that determination, see a similar question at: https://ttlc.intuit.com/questions/3399983-tax-issues-regarding-flipping-of-a-house
And references at:
https://www.hrblock.com/tax-center/income/real-estate/flipping-houses-taxes/
https://fitsmallbusiness.com/taxes-on-flipping-houses/ https://www.lendinghome.com/blog/how-to-maximize-house-flipping-tax-benefits/