Gains eligible for deferral is clarified to be capital gains, not ordinary gains.

This was something pretty out of the ordinary for the attorneys (the bank’s and ours), and it took more than five months from accepted offer to closing.

Flipping a house generates ordinary income tax- so you won't be able to utilize that and get any tax advantages from buying a house in a QOZ. 

One last point: remember that the main underlying reasons for all this regulation --- at least on its face --- is to protect the tenants and ordinary consumers.

If your intent right out of the gate is to develop and sell, the income wouldn't be short-term gain, it would be ordinary income with self-employment tax exposure.Holding for a year doesn't matter. 

Normally installment sale has three components1) Your basis that is not taxed 2) Capital gain ( not taxed as your home qualifies for sec 121 gain exclusion) 3) interest - taxed at ordinary rate.  

@Angela Smith If you have not held the property for a year then it is short term capital gains which is taxed as earned income, or ordinary income.

We've agreed to a contract on the property but have the Inspection still upcoming and can back out (or ask for a reduced sale price) if we find anything out of the ordinary that would greatly increase our rehab budget. 

If a note alone is enough for you to repossess a home, then why do people record mortgages for ordinary real estate?

Flipping homes that rises to the level of a trade or business is subject to ordinary income tax rates, and the flipped homes are treated as inventory, so that portion of your business can be considered a "dealer".Rental real estate is not, however.