Where to enter expenses for the development & sale of land

[mcgeemarathon]

We live in the Florida Keys where there are strict requirements for land to be “buildable”.

In 2017 we purchased an empty waterfront lot for $340,000 classified as “vacant land”. We sold it as a buildable lot in 2023 for $800,000. In order to go from vacant land to buildable lot we incurred $126,500 in professional fees, inspections, contractors and permit fees.

I entered the proceeds from the sale of the property in “Investment Income” under “Stock, Cryptocurrency, Mutual Funds, Bonds, Other”. According to the help pop-up in TurboTax this is the correct place to enter the land sale. TurboTax gives me a place to deduct closing costs and commissions from the sale and generates a form 8949.

However, it doesn’t allow me to deduct the additional $126,500 in professional fees, inspections, contractors and permits on form 8949.

Adding these costs to box G “Amount of Adjustment” doesn’t feel correct. Where do I itemize these expenses?

Thank you

[zomboo]

Closing costs and commissions on the sale are subtracted from the sale price. If this is not reflected on the 1099-S form received, enter 'E' in column (f) of form 8949 and an adjustment in column (g). The costs to improve the lot are added to your basis reported in column (e).

[mcgeemarathon]

zomboo, 

Thank you. Where do I go in Turbo Tax to detail those costs so they appear on 8949(e)?

Thank you,

Jim

[zomboo]

You don't detail or itemize the costs on 8949, just the total. But keep records of the improvements with your records of the sale. Remember, you should only need to enter data in columns (f) and (g) if the proceeds from the sale shown on 1099-s don't reflect the sales commissions.

[mcgeemarathon]

I don't have a 1099-S.

Should I have received a 1099-S from the realtor?

I tried opening form 8949 and used the override function to enter the additional expenses. But TurboTax reports this as an error "Using an override can prevent the cross checking that's important to an accurate tax return".

There has to be a way to enter these expenses against the property. What am I missing?

Thank you,

Jim

[zomboo]

You should have something that shows the proceeds and costs of the sale. You don't have to override anything. Just enter 1) Your proceeds minus the commissions and 2) Your basis plus improvements.

[mcgeemarathon]

> You should have something that shows the proceeds and costs of the sale.

I do, my HUD-1

> You don't have to override anything. Just enter 1) Your proceeds minus the commissions

I have

> and 2) Your basis plus improvements.

There is no place for me to enter this info. 

I am under:  "Wage&Income"-->"Investments, 1099B or Broker Statements"-->"Stocks, Employee Stocks, Cryptocurrency, Other"-->"Real Estate Sales". The only option here is to enter Sales Expenses.

I entered the sale of the property here per the "Learn More" popup.

The only other option I see would be under "Less Common Income", "Sale of a Home". This appears to be for the sale of a primary residence, but it does have a box to enter "Adjusted Cost Basis". 

[MarilynG1]

You were on the right track.  When you choose 'Stocks, crypto, etc.' on the next screen choose 'Other' and Continue.

On the next screen, enter the broker name and Continue.  On the next screen, you enter the description, how you got the land, when you got the land, when you sold it, sales proceeds, and cost.

Continue, and on the next screen enter Sales Expenses. 

@mcgeemarathon 

[mcgeemarathon]

MarilynG1,

Those are exactly the steps I took. But I think I may see the problem. 

I did not receive a 1099-S from the realtor, only a HUD-1.

What I did:

For "Proceeds" I entered the gross sale price ($800,000).

For "Sales Expenses" I entered closing costs and the 6% commission to the realtor ($66,469).

Should I have:

Should "Proceeds" be the net received after closing costs and commission and "Sales Expenses" ($800,000-$66,469=$ 733,531) ?

And "Sales Expenses" be expenses -- professional fees, inspections, contractors and permits ($126,500)?

If yes, where do I need to itemize those expenses or  do I need to itemize them?

Thank you,

Jim

[zomboo · Accepted solution]

Since you didn't receive a 1099-S,

Proceeds will be Sale Price minus Commissions: $800,000 - $66,469 = $733,531

Total amount paid will be Purchase Price + Improvements: $340,000 + $126,500 = $466,500

That's it. The sales commissions are covered in the proceeds, so don't check the 'Additional sales expenses' on the next page, check 'None of these apply'. This section is when you have a 1099-S that doesn't reflect the sales expenses.

You don't itemize your improvement expenses anywhere.

[DawnC]

You don't need to itemize the costs - they are an adjustment to the basis, so add the improvements to the price you paid for the home.   Enter the proceeds as the net $ you received after commissions and expenses.  Expenses include:

• Any sales commissions 
• Any advertising fees
• Any legal fees
• Any mortgage points or other loan charges you paid that would normally have been the buyer's responsibility
• Any other fees or costs to sell your home

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