RP-2023-09, Optional safe harbor method of accounting for real estate developers

Revenue Procedure 2023-09 obsoletes Rev. Proc. 92-29, 1992-1 C.B. 748 and provides new rules and conditions for implementing the optional safe harbor method of accounting for real estate developers (developers) to determine when common improvement costs may be included in the basis of individual units of real property (units) in a real property development project (project) to determine the gain or loss from sale of those units (Alternative Cost Method). This revenue procedure treats the Alternative Cost Method as a method of accounting. Under the Alternative Cost Method, a developer includes the share of the estimated cost of common improvements allocable to the units sold in the basis of such units regardless of whether the costs have been incurred under § 461(h), subject to certain limitations. This revenue procedure also provides guidance on the application of the Alternative Cost Method to contracts accounted for under § 460 of the Code and the regulations thereunder.

Revenue Procedure 2023-09 will be in IRB 2023-7, dated 2/13/23.

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