Here's an example scenario-- suppose an example second home mortgage/PITI is $5k/month, and the place can generate $6k/month after cleaning fees/repairs/etc.I'm trying to understand what is the taxable income. 

If you're looking for ways to reduce taxable income, focus on passive investing.

But when you take possession of the cash it will be taxable but not affect the rest of your 1031. 

But don't see any reason why it couldn't be done.Keep in mind, I mentioned "shorter term" above, if you lose your job you have to repay it all within 60 days or it becomes taxable income. 

He can exclude up to $250,000 in taxable gain if he is single or $500,000 in taxable gain if he is married.  

you will report that activity when you file 2020 taxes in 2021z The reinvestment of the gain does not prevent it from being taxable.

However, I would be lowering my profit on the flip by the amount I've withdrawn from the LOC's, therefore lowering the taxable amount. 

When you refinance closely prior to a sale the IRS often interprets that as a way of taking profit that would normally be taxable. 

This is considered taxable income so you do get taxed, but you avoid the 10% penalty. 

Each payment, including the down payment, has 3 components:interest - fully taxable at ordinary rateprincipal, basis return - tax-freeprincipal, gain - taxed at a mix of depreciation recapture and capital gains rateThe ratio between #2 and #3 is 1/6 vs  5/6.And this is where you erred: you pay taxes on #3 at depreciation recapture rates first, until all depreciation recapture is paid, and then you switch to the more favorable capital gain rate.