Erik - the reason for using "might" is that the IRS would have to audit, and 100% of returns do not get audited. 

Reciprocating investment funds between two qualified plans to accomplish something that would otherwise by prohibited (self-dealing) can be construed as an arrangement in the event of an audit.

It's as much a CYA for the asset manager as anything else, since he may have to justify his recommendation to his boss or -- in the case of an audit -- even to shareholders in a sense.

All RMLOs, registered lenders of all kinds are subject to audits, examinations and compliance issues, fear not, if you're one of these, some day someone like me (in my past life) will be knocking on their door, some sooner than later, but everyone gets a turn eventually I'm sure.

Get an energy audit.

The issue is that if you are audited you must be able to demonstrate that you did in fact have the intent to hold the property for rental or investment purposes.

It's much simpler (in my opinion), and much easier to justify accounting decisions if you ever get audited (accounting matches up with bank/credit deposits, withdraws and charges).As for how to handle deductions, with flips, the houses are considered inventory and all costs (purchase, rehab and sale) are considered cost of goods sold (COGS).

(To be determined by audit  only been aware for the past 24 hrs of problem.)2.  

I could probably slick any bank out of a large chunk of change if I were a criminal type, of course I would not, but there are many who, if armed with greater knowledge would attempt to tweek an application or verifications or collateral to get past some issue they may have......too bad, but there are.There are audit aspects that I do not and won't discuss, there is no need to know by investors, borrowers or private lenders.

(upreit structure)Build the company up, it will trade over the counter for a few years while you build up the shareholder equity and then PCOAB audit and move to SEC reporting.Once you reach 5-million in equity, you can uplist to NYSE.Books to read: "Real Estate Investment Trusts Handbook" by: Peter M.