[bgau]

We have a partnership that has purchased some raw land (80 acres) with the intention of developing and subdividing it into 5 acres lots to sell in the next couple of years. At this time the land is indicated on the balance sheet as inventory. Can we also record the property taxes that we pay until we sell the lots as an addition to inventory and increase the adjusted cost base of the land?

[JohnNP]

bgau, on Oct 28 2008, 11:09 PM, said:

We have a partnership that has purchased some raw land (80 acres) with the intention of developing and subdividing it into 5 acres lots to sell in the next couple of years. At this time the land is indicated on the balance sheet as inventory. Can we also record the property taxes that we pay until we sell the lots as an addition to inventory and increase the adjusted cost base of the land?

inventory with an ACB is a novel concept

but be that as it may, brush up on S53 before deciding the relevance/appropriateness of the facts in question

[JD]

Yes, all direct cost will be capitalized i.e., in this case will be part of the inventory and when you will sell it, it will be expensed.

[David Blue]

JD, on Nov 27 2008, 05:01 AM, said:

Yes, all direct cost will be capitalized i.e., in this case will be part of the inventory and when you will sell it, it will be expensed.

If you are completing a joint venture. Which most land developements I have seen are done under.

You might want to consider the following GAAP rules

Land under development and for sale is valued at the lower of cost and net realizable value. Cost includes the acquistion cost of land, development cost and carrying costs.
Revenue reconinition, when substantial usuall 15-20 percent of the purchase price deposit is received
cost of lot sold are recored by using the net yield method of cost allocation. all direct costs are project to the time of sale.

will need a schedue in the notes showing Properunder development and for sale,

cost of land, plus carring charges,plus development cost, total costs lest cost of land sold.

and so on.