Construction loans

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  • mvines
    Junior Member
    • Nov 2007
    • 1

    #1

    Construction loans

    Client remodels (flips) and builds home but he and family live in them during remodeling/construction until they are sold so expenses are added to the basis of the homes when sold. Funding is through construction loans. Is the interest earned on these loans treated as ordinary interest?
  • taxxcpa
    Senior Member
    • Nov 2007
    • 978

    #2
    Funding construction

    Are you misstating your question? Usually someone who flips houses borrows money and pays interest, so it is an expense, not an income.
    If someone lends the money to fund construction, the interest would be income to the lender.
    If the contractor receives progress payments and earns interest on the money until he pays the related bills, that would be interest income.

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