(Most LOs will involve an assignment so both will be taxed as ordinary income.)Your opinion is greatly appreciated.Matt

This is Not an ordinary sale, where of course the first lien gets paid in full.  

Not triggering or limiting ordinary income and using leverage tactically is key.

The back dark patio can use a coat of gray or lighter paint.

Every other choice is still a pass through entity.The passive income from rent, assuming there is income from a tax standpoint after depreciation, has a much better treatment than ordinary income. 

This does not seem right to me as I do not consider scribbles on walls & smoke damage ordinary wear & tear.

For an owner occupied(primary residence) the 250/500 capital gain exclusion is not related to off setting the Ordinary Income generated by debt forgiveness.

Bottom line, for investment properties that are flips, your flip income and your RE sales commissions are taxed the same, ordinary earned income.

My future wife would own the new house and if, God forbid, something happened to either one of us (she could will it to her kids) or if, God forbid, the marriage didn't last (she could include that in a prenup).Quite frankly, it's all a bit confusing & stressful to figure out because I was married for 38 years to the same woman, thought I knew what my future plans were, thought my late wife & I were going to sell our house to my daughter (before prices skyrocketed) & we were going to get a Patio home. 

Ordinary income.