If you are flipping properties quickly you are considered a “dealer†by the IRS and subject to self-employment taxes AND you will be taxed at ordinary income tax rates on your profits in most cases.

I am looking for some of the experience apartment investors and developers out there to regale me with some stories about unlikely/unusual/out-of-the-ordinary things that have been discovered in the inspection/due diligence period of buying or developing apartment properties.

You will face a large penalty, and the remainder will be treated like ordinary income. 

You certainly can write off passive losses against ordinary income so I'm curious as to what you are referencing.

Do you have any policies in place for these out of the ordinary events?

I thought this was just for cap gains and dividend rates ( 15 or 20) were just based upon your ordinary rate

Such entity in the ordinary course of its business must be engaged directly in real estate management or development activities.2) Expenses related to the real estate will be paid by the corporation.3) The real estate will not be used for personal use.4) There may be periods of time when the 50% test described in 1(a) above is not satisfied.

"Gains or losses from the sale, exchange, or other disposition of property" are not UBTI if not from "property held primarily for sale to customers in the ordinary course of the trade or business."

Goggle cost segregation and you should be able to find some sample reports.You don't have to make the go/no go decision right away either...you can perform cost segregation after year 1 and catch up prior period benefits.Lastly, whether or not you can offset other ordinary income can come into play (things like real estate professional status).This is a tough one to cover all bases in a post.

Yes, I might be losing out on some additional income but really the "hurt" is in paying ordinary income taxes.