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Which is the preferred form, (1) or (2)? Why?
BEFORE a noun, "almost-finished' is better, since it emphasizes that 'almost' is qualifying 'finished', not 'report'. Not important in this case, but compare 'longest living animal' with 'longest-living animal'.
"almost-finished" is a compound adjective. It is the correct way to say
"I am attaching an almost-finished version of the report".
"almost finished" is not correct in this case. Here's a sentence where you would use "almost finished" without the hyphen:
"I am almost finished with the work."
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