Commissions are taxed as earned income.Aaron -For those doing buy and hold, this is an AWESOME suggestion -- I had never considered it before.But, to point out to the rehabbers out there, this probably won't save most rehabbers anything in taxes -- since most rehabbing expenses go directly to COGS, and because gains are taxed at ordinary income rates, you'll pay the same in taxes regardless of whether the income comes from commission or or increased profit on the flip.But for buy and hold, this is something we should all keep in mind.

Your friend will need to claim the consulting fee as ordinary income.If this is really your friends wholesale deal, then your friend, or an entity controlled by your friend, needs to be B.

If you withdraw the (now principal) funds before then they are subject to a 10% penalty.In essence I could rollover this year and pay ordinary tax on it.

Tenant’s Maintenance ResponsibilitiesTenant will: (1) keep the premises clean, sanitary, and in good condition and, upon termination of the tenancy, return the premises to Landlord in a condition identical to that which existed when Tenant took occupancy, except for ordinary wear and tear: (2) immediately notify Landlord of any defects or dangerous conditions in and about the premises of which Tenant becomes aware: and (3) reimburse Landlord, on demand by Landlord, for the cost of any repairs to the premises damaged by Tenant or Tenant’s guests or business invitees through misuse or neglect.

Ordinary people don't.

It is my understanding flipping houses is taxed at ordinary income.

You're probably looking at ordinary income tax maybe along with self employment and ACA surcharge as well. 

Then sell after the 1 year mark to avoid the ordinary income tax rate.

Also be aware the sell will have to pay taxes if your offer is accepted on 34,500 of ordinary income.

BTW, profits on stock trading are taxed as ordinary income if you are a trader and capital gains if you're in for the long term.