Tax question-flip turned rental-HELOC loans deductible? & other Q

[Seth Rouch]

I would like to preface that I've already sent this to my CPA (so please don't suggest "Contact your CPA") I'd like to hear from the BP community and your ideas and thoughts. Thanks in advance!

Scenario 1:

A flip - turned to rental (numbers didn't make sense to sell after rehab). We have 2 HELOC loans that paid for the renovation and the down payment. When we sell, some of the profits will end up paying those loans off. Will the pay off of these loans be tax deductible? Will the profits ALL count as profit- regardless of most of it going to pay off loans made on the property to create said profits?

Scenario 2:

Owner carry tax implications. Owner wants $X amount of dollars from the sale and anything after that I would recoup renovation costs and then profit. What do the tax implications look like for this scenario? Any input you may have as to why this may be a good/bad idea etc. is always appreciated.