You will claim the loss as a capital transaction similar to if you bought and sold stock. The Sales price is your starting point, less sales expenses such as commissions and transfer taxes, if any, and then against the total cost basis of the spec property, which will include the cost of the lot. As this will be considered a capital loss, there is a limitation of $3,000 in any year for capital losses to be claimed. This does not mean you lose the total loss, it just means that the $3,000 limit is the most you can claim in any given year. You will carry over any balance of the loss to future years.
Also, even though you purchased the lot in 2020, you constructed and sold the house within one year so it is considered a short term loss. For purposes of data entry, the date of acquisition would be when construction commenced and the date of sale would be the closing date. The example below may be of assistance to you but please keep in mind the numbers shown are for example purposes only:
Cost of Land Purchase $ 125,000
Cost of construction 625,000
Total cost of spec home $ 750,000
Sales price, net of
closing costs $ 720,000
Net Loss $ 30,000
For the above example, you would be able to take a capital loss deduction in 2022 of $3,000, and the balance yet to be deducted of $27,000 can be carried over and taken as $3,000 deductions for the next 9 years, provided you have no other capital transactions.
If in 2023 or future years you have a capital gain, that gain can be offset but any remaining capital loss carryover not yet used.
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