An LLC was formed in 2006 to acquire a 3 unit residential property, renovate it totally and sell the 3 units.
Some questions:
In 2006 all costs were "capitalized". In 2007 more renovations occurred and 2 of the 3 units were sold 12/2007 at a loss. I plan to treat this as a trade or business. I will deduct all costs as "COGS" and inventory the 3rd unit at 12/31/07. Sound ok?
Besides the mortgage that was paid in full there was a private loan that was satisfied at less than amount borrowed in 2008 at the last closing. Would this be a reduction of the property basis or separately stated income (eg debt forgiven).
Thank you in advance.
Kevin