A 1031 is for "Like Kind Exchanges"Like a truck for a truck, rental property for rental property, building for a building.A flip is an ordinary income process subject to incomes tax and FICA, and specifically mentioned in the code as not eligible for a 1031 exchange.

The duplex is high end 3br 2.5ba with garage and extra land for possibly building more units (The lot is 100'x250'). 2 floors with a garage and  balcony patio for each unit.

My fiancé and I are looking to build a stamped concrete patio in our backyard as well as excavate the current patio.  

It needs a new patio.

So I wouldn't have to do anything out of the ordinary on the selling end?

Gotta get to that sweet long-term cap gain rate  vs ordinary income!  

So if she sold it today, after two years of ownership, she'd have $14000 of ordinary income/depreciation recapture and $61,000 of capital gains.At that level, she is probably in the 25% tax bracket and her capital gains are in the 15% bracket, but it could be at 28% and 15%.  

We have all lived in a very comfortable environment of low-interest rates and quantitative easing/easy money policies for a number of years, and this has benefitted both home owners and ordinary real estate investors with low leverage costs.

Also, when I eventually sell the property and am required to begin withdrawals at age 70 1/2,  wouldn't my withdrawals be taxed as ordinary income vs being taxed as a more favorable long term gain outside my IRA?

It is ordinary income.