Facts and circumstances means the initial cost and condition matter.

Here's what the fuller picture seems to show, then:

They bought it in 2016 or 2017; sold in 2019.

"About 98% of the work was done by himself and his friends over the last few years."

That progress never had any one stage considered completed. That's why I don't see bifurcation here.

"His total remodel/fix it costs (exclusive of the original 2016 purchase price) are $140k. Of the $140k, $90k was incurred within the 12-month period prior to the sale of the property in April 2019"

You stated this: "because of the fact that almost 65% of the remodel costs were incurred within 12 months of the sale."

The $90k is 17% of the total basis in the project that has had 2.5 years of progress and the "65%" nor the "$140k" is not even a phase of completion that can stand alone.

Further, it's doesn't seem the land and building, separated, have different clocks, either. Not if the intent at purchase, up to time of sale, was to improve and rent when completed, similar to the routine operation this person has ongoing.

Again, it would be different if the starting point had been, for examples:

Nice land but dilapidated building

Real Estate bought to be improved to create different sellable portions

Building improvements completed in discrete phases

Any part placed in service over time

By the way, I am coming at this from the perspective of an equity investor in similar projects. For instance, we bought a "church" building that had been the tire shop behind a car dealership (clear storey building) and turned that into 3 residential and 3 commercial condos. That is Phased improvement.