So I am in the process of seeing if my contract can be amended to where I pay for the house and then the tax's later, or see if the city will give me a credit once I pay the full amount of the back taxes.

If there truly is a hardship then you have to decide what kind of workout if any you want to do in amending the lease terms.Dollar stores were a deal 3 to 4 years ago.

I would advise this be part of your organization to get your own spreadsheets, or, start with what others have developed in the file share and amend them to what works for you.Good luck.....

I do not submit an amended offer because that can be rejected and the deal is dead.  

That would make up half ($900) of the income shortfall ($1800).My lender's recommendation is that I amend my 2012 tax return to represent as income the three months I paid to the seller and pay the additional taxes on that amount (a negligible $383), as well as pay off a car loan ($6000 outstanding balance at 0.5%, that is free money I would rather NOT pay off with investment reserves).

I received the amended paper work signed it and sent it to the sellers lawyer.

At that time you can sign it as is, refuse to sign it at all and go elsewhere, or modify the agreement with what you want and negotiate with the brokerage and then sign an amended agreement.If the brokerage has an early cancellation damage clause and you signed it you will be hard pressed to recover anything from them.

When the delays on title became evident (which is really the SELLER'S problem), you should have amended your contract to give you time to deal with resolving these problems.

Perhaps you want to consider amending your returns and reporting the income as ordinary income.

You might consider a joint venture partner and requesting the short sale bank to amend the contract from your company name to your company name "and" the name of your joint venture partner.