.- New front porch and new deck/patio on top of garage.Hoping to sell it fast. 

This would be taxable event, you have to appraise the property and that amount will be reported to you as ordinary income by the IRA custodian. 

That's ordinary income, taxed at the recipients marginal rate.

It is my understanding that the loan needs to be repaid within 60 days or the outstanding balance will be subject to a 10% penalty & taxed as ordinary income.

The scope will include kitchen/bathroom remodel, and converting a patio area into a living space.  

Only giving up due to job relocation.A back patio was converted into a 3rd bdrm back in late 90's but I checked w/ city building inspection office and permit wasn't pulled for it so additional bdrm/SQ.

Short term ordinary taxable income if there is a gain?

Any interest they receive, of course, will be taxed at their ordinary income rate and it will take away any child tax credits and stuff they would normally qualify for, if the interest they receive is more than $600/yr each.   

California weather: outdoor space such as patio or deck with a cover would be nice.

My take on tax is that if the $15k is treated as rent, ordinary income tax rate applies; if it is treated as purchase price reduction which lowers the cost basis, capital gain tax rate applies as you have held it for more than one year.