Land development and construction

[pauw123]

This is for Sole proprietorship LLC

We bought land and some residential buildings. We rented some of those for a few months, we demolished one building (that’s part of infrastructure, that was the plan since day 1); built some houses, fix other houses, continue infrastructure, sold some houses.

Where do I include the land, the residential properties and the costs for infrastructure and building?

If I try to use schedule C:

I can’t add residential properties (only commercial and these are homes for sell)

If I try to use schedule E:

It’s only for rental properties (the intention was not to keep them as rentals, we rented them for 2 or 3 months only until we started construction)

Somebody suggested adding this as inventory but that makes no sense to me?

Help 🙂 Thanks

[Anonymous_]

---

@pauw123 wrote:

....the intention was not to keep them as rentals....

---

If you're a real estate dealer purchasing real estate with the intention of reselling the properties in the ordinary course of your business, then the properties are considered to be inventory.

Any income and expenses would be reported on Schedule C (in your case, which is a single-member LLC without an election to be treated as a corporation for federal income tax purposes).

See https://www.irs.gov/publications/p334#en_US_2022_publink1000313359

If this is your primary business and source of income, you should retain local tax/accounting professionals and local legal counsel.

[Mike9241]

i think your situation is complicated and to get proper advice you should consult with a tax pro. 

[pauw123]

I'm not a real estate dealer, I am developing the land from scratch: buying the raw land, doing a subdivision, paying permits, architects, town, doing the infrastructure, building the houses and finally selling them... 

[pauw123]

of course we have legal counsel! but that was not the question here 🙂

[Anonymous_]

---

@pauw123 wrote:

I'm not a real estate dealer, I am developing the land from scratch: buying the raw land, doing a subdivision, paying permits, architects, town, doing the infrastructure, building the houses and finally selling them... 

---

What you wrote is virtually the very definition of a real estate dealer. You're in the business of developing and selling real estate.

Real estate dealer.

You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. Rent you receive from real estate held for sale to customers is subject to SE tax.

[Anonymous_]

---

@pauw123 wrote:

of course we have legal counsel! but that was not the question here 🙂

---

The question was how you report your income and expenses from the sales of real estate you purchase, develop, and resell and it was answered; you report on Schedule C.

Rental income you receive from the properties that are purchased or improved with an intent to resell is also reported on Schedule C and is subject to self-employment tax.

As an aside, who is "we"? You did make that reference more than once in your original question. Are you actually a sole proprietor or do you have a partner or partners?