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@MGC94 wrote:

 

People give them money up front to build a house, but they might not spend all the money on materials that year. He is saying he's not paying tax on $142,560 because it not his money. 

So, if someone gave him $200,000 to build a house in December and he didn't spend the $175,000 on materials before 12/31/23 what am I supposed to do?

 

 

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Is this a Cash Basis business?

Is the money the customers pay your client refundable?  In your example, the customer pays your client $200,000 and then the customer decides to 'back out', would your client give the $200,000 back?  It is not taxable income until it becomes non-refundable to the customer (your client will keep it no matter what).