Question - A developer purchases a piece of property for $1,000,000. She budgets that there will be $300,000 in improvements to be able to start selling the lots. The land is broken down into 100 equal lots, i.e. equal size, dimensions and worth. She expects to see the lots for $20,000 each. In year 1 she sells 25 lots. In year two the overall improvement costs raise to $400,000, or $100,000 over budget. 25 additional lots were sold in year two. Please allocate the costs and advise, what is the taxable income for year 1 and 2, noting there are no other expenses outside the allocation of costs.