S Corp in the business of flipping houses using TurboTax Business for Corporations

[Fund247]

Hello, I am a real estate broker who is in the business of flipping houses. I file using a 1120-S form. I am trying to file my S-Corp return for 2022 using 2022 TurboTax Business (For Corporations, LLC's, etc) desktop version. I purchased a fix and flip in October 2022 and sold it in February 2023. 

Can someone please guide me on where I enter my purchase price, materials/supplies, closing costs, etc? My previous 2 flips in 2018 and 2020 I entered under "Rental Real Estate" tab.

However, I have read many different articles on this forum which lead me to believe that I should enter as "inventory" instead.  Another article on this forum stated that I shouldn't report the purchase and any expenses paid in 2022 at all but rather to report all of them in 2023, the actual year of sale.

I am not sure whether I should report 2022 purchase and supplies that were paid in 2022 in my 2022 return (which I assume will be capitalized and carried forward to my 2023 tax return adding to my basis and therefore reducing my "profit")? Or should I completely omit the purchase and materials/labor costs in my 2022 tax return altogether and only report them in my 2023 return (property was sold February 2023)? I owned for around 4 months total. Never rented 1 day. Purchased, did rehab work, then sold for profit.  

Also, do I leave Beginning inventory $0 and Ending Inventory $0??

Currently my 2022 is showing:

Beginning inventory: $0

Purchases: $499,999 (purchase price of the flip property)

Other Production-Related Costs: $43,519

Less Ending Inventory: $0

Total Cost of Goods Sold: $543,518

Am I entering my flip in the correct section?

Lastly,  how do I get it off my balance sheet when I report the February 2023 sale on my 2023 tax return using TurboTax Business? Step by step instructions would be greatly appreciated.  

Please help!

[Mike9241]

Since the S-corp is in the business of flipping houses, the costs incurred in 2022 would be recorded as purchases/other costs in the cost of goods section as you show. Because the house was not flipped until 2023 the ending inventory for 2022 would be $543K. What you are showing would result in IMPROPERLY taking a deduction in 2022 for the$543K even though it wasn't sold until 2023.  Then in 2023 your starting inventory is the $543K and since it was sold, the cost in ending inventory would be zero. this is how it gets off the books and properly expensed in 2023

I don't see how you cannot record the costs as inventory in 2022 and yet keep the books in balance. The $543K had to come from somwhere.

[Fund247]

Thank you for your reply! Very helpful indeed. 

A few more questions.  I sold the flip in 2023 for $610k ($47k net profit). I will also need to add another $20k rehab costs and sellers fees paid in 2023. 

Sales price: $610,000

Purchase Price: $500,000

Total materials/labor costs:  $63,000 ($43k in 2022 taxes plus $20k in 2023 for combined total of $63k)

Net Profit: $47,000

How would I enter in 2023 in order to reflect my $47k net profit?

Should my 2023 numbers be as follows?

Beginning inventory: $543,000

Purchases: $0

Other Production-Related Costs: $20,000

Less Ending Inventory: $0

Total Cost of Goods Sold: $563,000

Where do I enter the $610,000 sales price?