Real Estate Development-When to Expense vs Capitalize Costs
Posted: 30-Sep-2019 8:22am
Happy Monday to all!
Have a real estate developers LLC
The entity obtains a loan; buys land, & constructs
residential homes.
After the homes sell;the loans are paid off at closing.
The entity is under the $25 million gross receipts threshold.
I have in the past capitalized direct costs (WIP) until sales
& expensed interest, real estate taxes & insurance since
their receipts are under the threshold.
The Client wants to take the expenses each year as he incurs
them?? Is this method an option???
Obviously it will not be pretty when He actually sells property with
only currents costs in COGS. (he has another 2018 entity
with a large net income & is wanting to offset )
He isn't happy & I am not comfortable with this option..
Am I mistaken??
Thank you!
Have a real estate developers LLC
The entity obtains a loan; buys land, & constructs
residential homes.
After the homes sell;the loans are paid off at closing.
The entity is under the $25 million gross receipts threshold.
I have in the past capitalized direct costs (WIP) until sales
& expensed interest, real estate taxes & insurance since
their receipts are under the threshold.
The Client wants to take the expenses each year as he incurs
them?? Is this method an option???
Obviously it will not be pretty when He actually sells property with
only currents costs in COGS. (he has another 2018 entity
with a large net income & is wanting to offset )
He isn't happy & I am not comfortable with this option..
Am I mistaken??
Thank you!