Sale of home on 1065

[EminC]

Client (two member LLC) purchased a house 2021 and sold it for profit 2021.

Do you report the sale proceeds as Gross Receipts and deduct expenses as COGS? and where do you enter the other expenses like improvements and betterments of the house, as well as other expenses.

Thank you

[jeffmcpa2010]

If the LLC is in the business of buying and selling houses you would be correct, (Capitalizing all direct cost's into cogs)  Expenses not related to improvements of the house, would probably be ordinary expenses, but it all comes out the same in my opinion. 

[rbynaker]

---

@EminC wrote:

Client (two member LLC) purchased a house 2021 and sold it for profit 2021.

Do you report the sale proceeds as Gross Receipts and deduct expenses as COGS? and where do you enter the other expenses like improvements and betterments of the house, as well as other expenses.

Probably.  If they took the time to form an LLC there's probably a trade or business (as opposed to an investment) and that business is probably flipping houses on a regular and continuous basis with the intent of making a profit.

Improvements would be part of COGS.  Probably most other expenses would also but it depends on the nature of the expense.

Edit: That Jeff guy swooped in like a ninja and beat me by a couple minutes.  So yeah, what he said.

[EminC]

They only sold this particular property for their reasons but they're not in business buying and selling.

[rbynaker]

---

@EminC wrote:

They only sold this particular property for their reasons but they're not in business buying and selling.

---

They're probably not going to convince me this isn't a Sch C activity but they might convince other preparers (and that's fine by me).  What did they do with the proceeds from the sale?