You will pay ordinary income taxes at your marginal rate.

Patio downstairs and balcony upstairs Plenty of room for a large family or a mother-in-law apartment.

Not sure what you mean here-short sales are treated as cancellation of debt and taxed as ordinary income-- if you are referring to the mortgage forgiveness debt relief act as the "tax waiver"then it was extended through 2014.

Provided I meet the income limitations, I am allowed to use my net passive losses to reduce the amount of income tax I might have to otherwise pay on my other ordinary income.

I use this to determine what the cost are associated with damage to the unit outside of ordinary wear and tear.

Quote from @Scott Felix: Yes, you can charge them to repair the walls.The law allows you to charge for anything that is not "ordinary wear-and-tear" that would be expected from anyone living in a home.

Learn about ROI, invested capital, interest rates, entrepreneurship, capital gains taxes, passive income (tax) vs. ordinary income (tax), direct marketing, contract law (crucial!)

@John Woodrich   @Nicholas AiolaForm 6252 instructions for Line 12(Ordinary income recapture) only includes depreciation from line 31 of Form 4797 which would be $0 in the case of MACRS real property.

That's funny because I and other Contractors always thought the SOW was to keep the customer accountable :-)  They were always the problem in my many years of experience......Not kidding at all, that is my experience too, however, being on the client side many times in the past, the SOW did help keep the contractor in line more as I was not the ordinary client being a RE investor/developer prior to being a contractor.Great post and flippers AND buy and holders should take note of this (in fact, so should wholesalers!) 

Would your gains be taxed as ordinary income or as capital gains?