land sale had planned to build

[heididubin]

I bought land in 2020 planning to build a home. It took 2.5 years to get approval to combine two parcels. In that time, my plans changed, so I am now selling the land. I see topics about selling land that was an investment, or land for a second home. This was supposed to be my first home, so I'm not sure what to do. Expenses incurred included: engineering fees; architectural fees; interest; property taxes; at sale, will include commission and other closing costs. Does it matter that this was supposed to have been for my new home? What expenses can be added to the basis to reduce capital gains? Also, do I need TurboTax Premier to do this, or will Deluxe suffice?

[Mike9241]

land can be treated as part of home sale under certain conditions. you do not meet the occupancy requirement so no home sale exclusion is available. because you probably did not elect with the 2020,2021 and 2022 returns to capitalize the interest and taxes thus those cost do not add to your tax basis. you can make the election for 2023 IRC 266. Turbotax does not have the election which must be included with each annual 1040 return. Therefore, you will have to male in the 2023 return unless you want to forego the benefit.

your cost basis is what you paid + costs of improvements + closing costs on purchase. sales expense would include closing costs on sale. 

here's what the IRS says about other costs

Constructing assets. If you build property or have assets built for you, your expenses for this construction are part of your basis. Some of these expenses include the following costs.
Land.
Labor and materials.
Architect's fees.
Building permit charges.
Payments to contractors.
Payments for rental equipment.
Inspection fees.

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A literal interpretation would suggest if actual building of the home never started, these costs would not add to basis

[heididubin]

Thanks. You are right, I didn’t capitalize interest and taxes. Can I amend returns? Also, does the TurboTax Premier (rather than Deluxe) allow me to do this for 2023? Thanks for your help!

[Hal_Al]

Q.   Can I amend returns to capitalize interest and taxes?

A. No.  The election to capitalize must be timely.  

Q. Does the TurboTax Premier (rather than Deluxe) allow me to do this for 2023? 

A. Yes. If you are using Online TT, you'll need Premier. If you're using desktop (download/CD), any version will work, including Basic and Deluxe.

Q. Does it matter that this was supposed to have been for my new home? 

A.  Simple answer: no.  Since it was never actually used as a home, the sale may be treated as the sale of investment property.  Since there is a capital gain, the question is moot.  A gain is taxable, regardless of the use (you don't qualify for the home sale exclusion).  Had there been a loss, only the loss on investment would be deductible.