I think you are confusing the use case. If a business pays employees to build a residential home for $275k and the land cost $0, they don’t deduct anything. Assume they sell the home for $350k. They then have a cost of sale of $275k so they make a profit of $35k0 - 275k = $75k. They then pay tax on the $75 in the year the home was sold.

Section 174 relates to Research and Development expenses. The idea originally was they firms were spending a lot of money to develop a product that might have long useful life, but the expenses were all hitting the operating expense in the current year. This is great for cash tax purposes, but bad for metrics like operating income and net income which impact many firms valuations. Arguably it also misrepresents the firm’s business model. A fundamental idea is that costs should be reflected consistently with the period that revenue is earned. With R&D, the revenue is expected to be earned over many years but the costs are incurred upfront.

The better example is not a residential home, but an apartment building. The builder spends $300M to build the apartments then leases them for the next 30 years. In that example, the $300M is depreciated over 30 years so the costs track with the expenses.