After more investigation, it appears to me that if a married filing jointly couple has less than $315,000 of taxable income then all of their Schedule E income would qualify for the 20% deduction for pass through businesses (sole prop, LLCs, etc.). 

Other issues aside, once you take possession of the funds, it's taxable.

Now your IRA has $2,900 worth of taxable income. 

No taxable event. 

And I'm not talking about his taxable income- I'm literally just talking about the operating funds to cover all actual expenses incurred by the property throughout the year. 

Based on what you've said, I calculate your taxable income on that building at -$12,500 a year.

It is an excellent method to convert regular EXPENSES into taxable DEDUCTIONS.

This is very legitimate and can boost your taxable income.If you're anticipating a drop in your non-rental income that will be causing your DTI ratios to jump (such as leaving your employment or having your spouse stay home), then you might well want to show higher taxable income on your rentals as a way to bring your DTI ratio down and maintain your borrowing capacity.

Eventually, if you sell the replacement property in a taxable event, all of the deferred capital gains will be taxed at the capital gains rate in effect at the time of the sale.Contrast this to your "sell as primary residence" strategy which may exclude up to $250K in profit from appreciation from taxes (forever).

Nothing happens when you quit buying property -- at least no taxable event.