As for closing costs, you shouldn't have to pay anything out of pocket, the costs would be deducted from the cash you pull from the property.

I have a Villa in Tulum, Mexico and am having a hard time understanding how much of the "Host Payout" actually goes to me, because I would think that the entire $665.57 would be mine but it looks like they deducted the "Cleaning Fee" and "Remitted occupancy tax" the "cleaning fee" I understand but am confused on where the "Remitted occupancy tax" is going.

But we were able to rent it to only for $2150 and after all the deductions, these are negative cash flowing by about $450 each. 

@Justin Brin Yes but I make it clear they will get deducted from the security deposit if they get drips on the floor or carpet.

Agree get it paid for then it's down to deducting for insurance ,taxes ,upkeep .I backed out of a deal did I not want a mortgage  instead I will pay off the mortgage  I have left .Now it's simple math add line A to live on . 

Do I have to tell him or can I just deduct the removal and replacement fees from his security deposit?  

You will need to work with a tax professional to analyze your current tax situation (income, deductions, activities, etc.) as well as projected income from the fix and flip business.The benefits have to outweigh the costs (payroll costs, additional tax returns, more stringent reporting and compliance requirements, etc.).One important note - an S Corp is not an entity; it is a tax election.

Should be no problem deducting this business expense.

I think you are probably mixing apples and oranges.To have a capital gains tax of $30k you would have had a gain/profit of over $150k.I suspect most of the tax you owe is from depreciation recapture, which is taking back the depreciation deductions you had while owning the property. 

The ability to deduct expenses is a big draw as well.