He's acting like a builder/dealer and that could invalidate his part of the exchange.And honestly, if he's a builder intending to build and divest these lots then there isn't going to be any tax savings for him. 

This homeowner decides he wants to back out of a contract after we invested our time and efforts into coaching him how to get rid of his  bad drug using and drug dealing tenants which we had permission to record cleaning out the home, offering to help him sell his belongings on Facebook getting rid of pests and beginning our re-hab.

Not saying its a bad deal if it is cash flowing well that will help get your next property while you are waiting to move to a bigger deal.@Eric

This may not be a practical answer, but can you self administer a rapid drug screen to your prospective tenants. 

Rather than just a one-and-done dealer. 

However, I have heard horror stories about the homeless that can park out there and the police not coming to assist, gunshots, disrespect for your property, human waste lying around, and drug houses, and more.

Is it one-off sales (not good) or do you have a large number of repeat buyers (better).For example, think of a heating oil dealer. 

We live in a 1700sf mobile on one, and the second lot next door was bought to discourage the meth dealer from using it for deals.

You want to make sure you are not selling securities or compensating someone who is not a broker dealer for raising capital.  

Wholesaling is a dealer activity that creates trade or business income.