Deb, first of all, please turn off your cap lock. Not only does it make your post hard to read, it is considered shouting.

If this was a one time deal, it goes on Sch D. If you are planning on flipping, it goes on Sch C, but there are a lot of rules that go with flipping (inventory, section 263a costs, etc) and you should see a tax pro.

Helen, EA in PA

I might (just might) disagree with my esteemed colleage, Helen, BUT ONLY on the "one time" issue. My position focuses on your INTENT - if your intention was to go into business then it belongs on a business return but if your intention was investment oriented then it might fly on Schedule D - MY emphasis is on might.

I also have some concern on your use of "WE". Unless you're in a community property state AND in business with your wife, the business activity likely does NOT belong on a Schedule C, but rather Form 1065 - if you were a defacto partnership - or a corporate return - if you incorporated.

Helen is quite correct though in her reference to IRC Sec. 263A costs. These are intricate and will most certainly require the help of pro.

You may also have to consider a different method of accounting besides cash. In the construction industry Completed Contract or Percent of Completed Contract are commonly used. In any case you need to consider matching your income with your revenue - the vast majority of my contructions clients accumulate construction costs as WIP (sort of like inventory) and then deduct the costs in the year of sale (or closing).

You really do need professional help.

Bauschard v. Commissioner may be helpful in determining if you were engaged in a trade or business, which would require filing the sale as a business entity. Property held primarily for sale to customers in the ordinary course of business is not by definition a capital asset; the capital asset in this case would be reported on Schedule D. The case notes these tests: "The purpose for which the property was originally acquired; the activities of the seller, or those acting either with him or on his behalf, with respect to the improvement and actual disposition of the land; the frequency and continuity of sales; and the purpose for which the property was held during the taxable years." The Court also noted "A significant factor in this proceeding is the relatively short lapse of time between the various acts of acquisition, development, and ultimate sale of the Snider tract."

Your fact pattern doesn't provide enough information to give a definitive answer, but hopefully the above criteria will help.