Ripped out an old aluminum awning & enclosure on the back patio.  

Almost $20,000 in lawyer fees and 2+ years of litigation later, we're foreclosing on the house in order to collect our court fees from him.After that, we adopted a very simple rule... we pull permits for goddamn everything, no matter how simple, no matter how ordinary.

It's ordinary income, treated just like your real estate commissions.

Mostly landscaping and replacing an old ceiling fan in the patio. 

Going to attempt to summarize everything up to this point.Current Stage of construction: FramingWe purchased this lot about 3 years ago for $6000Have built 3 homes in this same neighborhood, this is our 4thTook about 6 months of re-zoning to allow for a variance in the rear of the property so we could maximize the size of the home, mainly to accomadate a master bedroom downstairsLot was vacant, cleared out a few trees and started on the foundation, concrete slabAltered the plan a bit so that the patio faced east instead of north, thus making it open to the patio.Project Description: 2-story home, 3 bed, 2.5 bath, 1 office, 1 game room/4th bed2808 sqft,  Lot  6,568 sqft        

There are some drainage issues that need to be addresses with the french drainage system that is installed in the concrete patio out back. 

A lot of people like having canals in the backyard for casual fishing and can be a peaceful environment when a patio is set up properly.

Ordinary income tax, along with self employment tax on the income.

Private lenders, in our case, are ordinary people that have a specific amount of capital that want invest with us to flip houses.  

You could also explain that you really need the tax benefits that real estate depreciation can provide (up to 25K offset to ordinary income), whereas interest income from a loan would be at your highest tax bracket.