From what I have read, this is viewed as a "gift" and so the capital gains tax implications change based on local laws/regulations.

It's a loophole, and it will eventually close, everywhere.Any property I buy going forward that I plan to hold long term I will only buy in areas that are already extremely strictly regulated for STRs. 

Any opportunity is too good for the law abiding citizen, unless he can bring to table millions of dollars , spend 60 hours on some BS course to acquire a license, to have every breath and sigh controlled, regulated, restricted, obstructed and sabotaged.

Be sure to study up on your local rules and regulations and make sure you're comfortable with it all before taking this on.

STR just became regulated and the new ordinance is causing some angst. 

@Rania Mutumhe If you are trying to finish and rent out your basement, then there should not be any regulations stopping you from doing that.

Are there any regulations to be aware of ?

Do you happen to have any preferences when it comes to which jurisdictions have "friendly" Section 8 regulations for getting a property approved?

I know that every state can have their own laws and regulations.

Castle Rock actually doesn't regulate Airbnb or shirt term rentals, so you're good there (as long as you're not in an HOA).