In reality, the cost basis gets adjusted by different expenses/renovations/depreciation you may have made to the property and the sale price gets reduced by certain expenses ... but let's not complicate this for right now :)  Key thing to understand, though, is that doing a refi doesn't change your cost basis.You paid $209k and sell for $300k ... that's a $91k gain that you will be taxed on - the Fed will treat it as long term capital gains - depending on your state, it will likely be taxed as ordinary income.If you've lived in the property as your primary residence for 2 out of the last 5 years, you can shield the entire $91k from being taxed. 

In a fix n flip you are buying primarily to resell which is why Pratik identified that you'll pay ordinary income. 

If this is what you do and you are a developer/builder then you could be classified as a dealer with inventory so profits would be recognized as ordinary income. 

@Ed ParkThe BP calculators are there to determine whether you should get into a deal or not.We are cash-basis taxpayers so we normally only deduct expenses that are paid out during the year so long as it is ordinary and necessary to our business.As such, reserves for vacancy, reserves for cap-ex are not deductible.We would instead expense actual repairs, insurance, real estate taxes, mortgage interest, etc.Security deposit is not taxable.

Income from the K1 will flow through to your personal tax return and you will get taxed at your ordinary income rate. 

This will be at your ordinary tax rate up to 25. 

Besides, any depreciation deduction is recaptured when the asset is sold, albeit at a lower tax rate than the ordinary income that was offset by the depreciation in the first place.Another important consideration is that an investment yielding a 2.0 multiple isn’t necessarily a better investment than one yielding a 1.4 multiple.  

This is not an ordinary appraisal and most appraisers won't understand all of the issues present.

@Robyn Smyles it probably doesn't matter because it is taxed as ordinary income so it drives your total income up. 

You'll pretty much just be earning ordinary income.