But making a sub optimal financial decision or even worse a bad lifestyle decision to simply avoid paying taxes is completely self destructive. 

With mid-term rentals if your average guest stay is 30 days or less but you provide substantial personal services (daily maid service, meals, shuttles etc, more like a hotel) then it would be non-passive...but you'd also pay self employment tax on any income as well. 

This description is pretty standard for any tax firm.

What will be the tax implications?

If you determine that a cost segregation study is beneficial to your business, ensure you work with a qualified professional that conducts the study in accordance with the IRS standards and audit techniques.What are your favorite tax savings strategies?

Would we be able to avoid paying taxes on the gain and also not have to recapture depreciation?

I agree with just paying the tax and don't try to force something that might not be a good fit.

Money has to come from somewhere so where will it come from.issue will be if they increase sales tax it will be regressive tax as those who rent and don't own and have low wages will still pay more for everything.

I have a capital gain taxes question:if I sell my home for 510k and provide the seller 10k seller credit towards escrow costs, would I be paying capital gains taxes in California for that additional 10k?

Non-Passive =/= Subject to SE tax by default.