your tax's are probably based on owner exemptions.. so WAY tax's on a 125k home in Texas or Houston will only be 700  a year more like 2,000 plus a year...

Flipping houses in an IRA, if done on a regular or repeated basis is subject to UBIT taxation, since this is considered a trade or business (and therefore this tax-exempt entity is competing with tax-paying businesses).  

Then you could take the entire 121 exemption tax free but Joe A. is right you'll have to recapture depreciation in any case.

@Andrew R. the NRW 91-01: Withholding on Sale of Real Property by Nonresidents is a good link - I went to bookmark it and found I had already done so in 2012 :)My understanding is that it's "withholding" meaning the seller may get some or all of it back once s/he/they file a tax return in Rhode Island for that year.Also a close reading mentions a possible exemption for sellers 55+"In the event that the sale of the property by a nonresident will not be subject to tax under Sections 121 (One-Time Exclusion - Over 55 Principal Residents)... the nonresident seller must make the gain election and file the RI Form 71.3 Election even though no withholding need be made""If the property Martha was selling was her residence and if she otherwise qualified and intends to treat the sale under Section 121 of the Internal Revenue Code (one Time Exclusion Over 55 Principal Residence), she would still have to file the election form 20 days before the closing but would complete the election form and use the special types of transactions area on the back.

There are also exemptions and incentives if you intend to develop villas or cottages for nightly rentals.

The ESA exemption is also horribly abused if someone finds a sympathetic doc to write the prescription.2) Dog Bites and Insurance.

The seller is exempt from Dodd Frank when selling to an investor.   

@Daniel DietzYour analysis is in the right direction, but not quite there.1) Determine the debt financing ratio - in this case .602) 60% of the gross income is then looked at by UDFI3) 60% of all deductible expenses are applied, so 60% of straight-line depreciation, 60% of the interest on the note, 60% of property taxes, etc.4) $1000 exemption applies5) The net amount after deductions and exemptions is then taxable to the IRA, and the trust tax table is used to determine the tax amount.Even if you have a negative UDFI liability, it can be worth filing the 990-T in case you can carry that loss forward to future years.We have a UDFI calculator on our website and if you PM me, I can send a link to you (BP does not want me posting that outside content on their forums).

I heard that there might be a sale tax exemption program when purchasing renovation materials and etc.

If so then they should qualify for a partial primary residence exemption under sec 121.