Tax Consequences of Developers' Future Improvement Costs
New York State Society of Certified Public Accountants
The CPA Journal
Under certain conditions, real estate developers may deduct estimated future costs in a current year. The tax treatment of future improvement costs has been in a state of flux, but with the issuance of Revenue Procedure 92-29, the IRS has eliminated the confusion. For sales of property after 1992, developers may use either the "general method" or the "alternative-cost method" in accounting for common improvements: streets, sidewalks, sewers, playgrounds, clubhouses, tennis courts, and swimming pools. A discussion and comparison of the 2 methods and a series of 5 examples show that the general method and the alternative-cost method can vary significantly in result.
Recommended CitationLynch, Michael F. and Witner, Larry, "Tax Consequences of Developers' Future Improvement Costs" (2014). Accounting Journal Articles. Paper 55.