Deductions for Home Flipping Business

Hi All,

I have a client that is in the home flipping business, not just a random one here and there but will purchase a few a year to remodel and sell. He doesn't ever live in them, just fix and sell.

My question is in regard to capitalizing expenses vs expensing on the P&L. I have created 2 accounts on the Balance Sheet. 1 is for the Purchase Cost (info all taken from settlement statement) and the 2nd account is what I call 'Construction in Progress'. If I understand correctly from what I have read on other forums, all expenses to fix up the house should go to this CIP right? Up until the home is sold and then I move it over to COGS. Does this include items that aren't really 'improvements' (like a new roof) but fall more as maintenance, such as paying a pool person monthly to just maintain the pool? What about utilities, loan interest or insurance?

I seem to keep reading articles where some state to put on BS and others on P&L. I am not a tax preparer so looking for some guidance.

Thank you,

Steve

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