I'm sure plenty of people are hit with a penalty is they sell in under 5 years and (insert incorrect method of reporting here).Maybe some more details and the reason why you're asking will generate a few good responses.

I am sure some lenders will chime in below pointing out how Tim is incorrect about not being able to "buy in the name of the LLC".I would seriously rethink going into business with your friend for 4 reasons:1) I can tell already that he will not make a good business partner.2) I'm guessing you are just going into business with him because he is your friend, not because he is bringing any experience or expertise to the table.3) This will likely ruin your friendship.4) It doesn't seem like you have thought this all the way through.

Yes.Those who tell you otherwise are just repeating incorrect information.

Some good and some incorrect advice on here (Roth IRA CONTRIBUTIONS [and only contributions, NOT earnings] are accessible any time tax and penalty free (no 5 year “waiting period.”Great forum thread.  

Most likely the county records are incorrect or missing something. 

I feel like it is being incorrectly being reported by someone, vs. 

I am purchasing a property and have come to find out that the info in the property condition disclosure statement is incorrect. 

@Cara NallCP2501s are frequently issued for "matching errors" and don't necessarily indicate an incorrect tax return.Generally the 1099-S amounts for rental properties sold are reported on line one of the 4797.The link you referenced merely contains instructions for TurboTax and doesn't clarify how the sale of rental properties were actually reported on your return.If the sales were reported correctly, a CP2501 notice can be frequently cleared up with just a letter explaining everything.It's not really possible to tell what's going on in your specific situation without seeing the complete notice and a complete copy of your tax return. 

You should start calling some local banks and CU's to get more specifics.As for getting an accurate ARV number, this is one of the most critical items and can make a deal bust if calculated incorrectly.

Also if I have input something incorrectly please let me know.Thanks BP!