If you are flipping versus buying and holding, you may want to look at the capital gains treatment. 

The treatment is driven by fact and circumstance analysis, not choice, and quantitatively Schedule C is disadvantageous.

@David Goodman Nathan, That was probably more directed at me for talking about 'crazy' tenants.After spending 5 years here in D neighborhood world, where untreated mental illness is rampant, I've come to see 'mental health issues' as a spectrum and those people that are unwilling to seek treatment and that visit their 'issues' on their poor neighbors that can't afford to move, just have TO GO.

With the survey in hand you can then create a proposed site plan which would generally include the following : Building size and location on the property, Septic area along with septic repair area ( unless you are able to tie into a sewage treatment plant), Parking, Building setbacks, Storm water retention area if applicable in your area, Lot coverage %, Fire Hydrant located within a acceptable distance for fire trucks to have access to, sometimes a landscaping plan and a lighting plan may be required. 

No Special Treatment. 

Is/was the tenant receiving medical treatment for mental illness?

That'll bust the gift theory pretty quickly...I think tax treatment will ultimately follow what the "partners" in this "informal partnership" agreed to...

For properties to qualify for 1031 Exchange treatment you must have had the intent to hold the property for rental income, appreciation, or use in a business.

@Andrew Y.Your question is too broad.It heavily depends on what the cost is for and the facts and circumstances surrounding the cost.Rentals have more favorable treatment than fix and flip.  

Everywhere I have looked just talks about eliminating the capital gains on the original investment-but no discussion on the treatment of gains on the plan assets (which is what I really want to eliminate when I cash out, instead of having to roll into a 1031).Thoughts?