The repair doesn't get made.My lease is clear that tenants must give the vendor access during ordinary business hours.

If we are classified as dealers under the tax code, it seems any profit a partner takes home would be taxed at their ordinary income rate vs. capital gains tax if we were considered investors?

Capex is separate from ordinary maintenance.There are also considerations when buying an occupied rental.

True, I never built anything more than a treehouse when I was eleven, but technically a treehouse is a house so…All I had to do was work with Honomobo to finalize the design, get architectural drawings, receive HOA approval, get a county building permit, get a driveway permit, clear trees for a build site, find a logging truck to take those trees to a lumber mill, find a mill, find someone to take the lumber from the mill to my house, dry the lumber, take a semester of woodworking to learn how to make furniture, engineer/permit/build a septic system, get a well permitted and drilled, install a well pump, learn what a pitless is, install a water line from the pump to the foundation, install a pressure tank, connect the house plumbing to the septic and pressure tank, get the the power company to permit and install a podium for power on site, run power to the foundation, connect the power to the house, engineer a foundation, excavate, get two different sized steel wet plates fabricated, pour said foundation with wet plates mounted all at the same elevation in twenty-five precise locations, hire a crane, hire rigger, hire a welder, build a retaining wall because the dropoff from house to ground level was higher than expected, insulate the crawl space on my own by watching a YouTube video to learn how to load .22 caliber cartridges into a ramstead gun and shoot two and a half inch nails through insulation board into my foundation, badger a supply company until they finally delivered the right insulation board, get them to take away the wrong insulation board they brought that was broken by the wind and scattered into pieces all over the property, find an illusive 3x3 foot crawlspace door, learn how to use a core drill to make a four and a half inch hole in my foundation to install a code required fan to vent the crawlspace that my engineer thought was a stupid requirement and failed to tell me about, figure out what the hell going on when the Honomobo project manager tells me the measurements you gave him of the now poured foundation are wrong, have a panic attack, review plans with engineer, realized the project manager was mistaken, scream into the void, get the last available short term rental license application that had a thirty-day expiration window to pass all inspections, coordinate all subcontractors needed on install day, check with the sheriff about parking semi-trucks on the road, rent a porta potty, rent a dumpster, have coffee and donuts for everyone, oversee the Honomobo install crew that didn’t need overseeing, pass a blower test, pass state inspection, pass septic inspection, build a wooden curb to cover protruding rebar for an unpoured patio, build a temporary front door landing that could theoretically be be permanent so as to pass final county inspection, get a certificate of occupancy, pass the county short term rental inspection on the very last day before it expired to get the very last available license so that I could rent the house to make money in order to no have immediately have to sell, pour the sidewalk and patio.

But if you have done cost segregation studies and have 1245 / ordinary recapture to deal with, all of that income is taxed in the year of the sale, regardless of what you received for proceeds.Not previously as big of an issue, but in this world that we have had the last few years of 100% bonus depreciation, it is rearing its head more and more often.

Active Income: Profits from fix & flips are considered active income, subject to ordinary income tax rates, unless structured through a business entity.4.

If you convert your shares to a promissory note that may trigger depreciation recapture at ordinary income.  

Here’s a summary based on the responses:Tax Rates and Holding Period:For flips (properties bought, rehabbed, and sold quickly), profits are taxed as ordinary income, not capital gains.The holding period is calculated from the purchase date to the sale date.1031 Exchange:1031 exchanges apply only to properties held for investment, not quick flips.If intending to use a 1031 exchange, I must reinvest the proceeds into a like-kind property within 180 days.Holding a property for less than a year may disqualify it from 1031 eligibility due to lack of demonstrated investment intent.Thanks again for all the helpful advice!

We're planning on making quite a few updates to the property, like putting in patios for each unit, fencing, landscaping, etc.

My fear now is that by posting it on Airbnb I put it out for the world and I believe technically it can’t be rented separately but zoning said they would just tell her I have a permit pulled or it was just people who are renting my other place on the same lot so basically really no way to prove it.I was thinking instead of a kitchen is just rent it out 3-4 months a year with an outdoor flattop grill on the patio a nice seating area and maybe an outdoor sink.