TYPE OF GAIN FOR CONSTRUCTION IN PROGRESS

Forum|Forum|1 year ago
April 23, 2025
1 reply
12 views

Good Afternoon Community,

I have a question about selling the asset Construction in Progress. I have a client that is in the process of selling an uncompleted shopping center. The last few years I have been accumulating costs in a Construction in Progress Account because this company is building a shopping center to rent out to businesses. Somebody approached them a couple of weeks ago before this building has been put into service. From the research that I have done if they sell at a loss it will be a short term capital loss. It will not qualify for ordinary loss treatment because it was not in business use for at least one year. If they sell at a gain I assume the same will be true that it will be a short term capital gain because it was not in business use for over one year. Has anybody had any experience with this and how did you handle it.

Thanks,

John Skouberdis

ProSeries Professional

This topic has been closed for replies.

Best answer by BobKamman

sjrcpa,

I don't think that would fit. They are into commercial real estate management and they are not builders. I think I would be stretching things out by saying that this is regular sales and the expenses are cost of sales for this one project that they did. And the loss is quite big at one million dollars.

John

"I am not a builder," the builder insisted.

"If the shoe fits we are going to make you wear it," replied the IRS auditor.

T

Terry53029

Intuit Community Champion

This is what google AI has to say.

Selling a project under construction, or Construction in Progress (CIP), requires special accounting treatment. The project's costs are accumulated in the CIP account until the project is completed, at which point they are transferred to the appropriate fixed asset account. If the project is sold before completion, the sale price is recorded as income, and the CIP account is cleared out, with the costs recorded as cost of goods sold, according to QuickBooks.

J

jskouberdisAuthor

Level 5

Terry53029

I am not sure that fits my situation. This company is a commercial real estate company. They are not in the business of doing construction work. They undertook this as a special project. Using cost of sales and sales would look like they were a construction company that did this as their main line of business.

John

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