This would be a violation of IRS rules.You can invest in real estate, including flip transactions with IRA or 401k funds, but must think more like a fund manager than a guy with a hammer.Keep in mind, flipping is a business activity and as such incurs UBTI taxation within a retirement plan.  

In reading thorugh some of the other posts its seems as if i should NOT be paying cap gains tax at all?

With my background in Taxation, I have knowledge of tax laws that could be helpful when it comes to the capital gains tax when the project is completed.  

I feel this is adding another level of taxation that penalizes landlords...

I don't mind paying tax at all, but a gross receipts tax is an outrage  ... actually, I think Americans complained about that once, something about a tea party.

Prat,I recommend finding an accountant who specializes in real estate taxation over one that is local.

Prat,I recommend finding an accountant who specializes in real estate taxation over one that is local.

I was struggling trying to wrap my head around the double-taxation aspect but I think I've understood it now.

Also, I hate the fact that for taxation reasons I need to "double" input the information from my PM into my QuickBooks, manually.

But losing money is never the right move, so I would consider Paul's suggestion of executing a 1031 exchange.If you're not familiar, a 1031 exchange is a lovely little tax loophole granted by the IRS to encourage investors to keep investing, in exchange for the promise of deferred taxation.