When you sell property, the difference between what you receive and your tax basis in the property produces gain or loss. When selling property, include what you paid for this, such as the land and the cost of constructing the home as well as the initial closing costs (e.g., attorney’s fees, etc.).
A business method of accounting requiring income to be reported when earned and expenses to be deducted when incurred. However, deductions generally may not be claimed until economic performance has occurred.