Form 4684 will be involved, that's for sure.And you already know that I will suggest getting professional help.

Regardless, I would NEVER involve the insurance company unless there was significant damage to the house. 

@Felix L PerezIt is okay if you are not proficient in tax - you can easily hire a tax accountant to help you.I am not good at plumbing and I would never dare to try to fix my plumbing issues.If you are involved in a flip that you acquired the property in 2018 - there won't be any benefit that you can use to do on your 2017 return.Expenses that are ordinary and necessary are deductible.

This is a more complicated strategy that involves the use of a non-recourse loan for the IRA, as you may not pledge a personal guarantee. 

What are the other cost involved beside the development cost.Any help would be appreciatedThanks

I wonder though if anyone has any advice on how to get into rental properties and make it fair for all parties involved. 

Excited to get involved, learn more, and do my best to help those in the community.

At this point, the goal is to deal with the person, who is handling the transaction and try to get out whole. glad to see my guess of 5k was about right.. that's what I have personally seen on the short sales I have been involved with.. never really seen more than that.. just hoping she only paid pennies on the dollar and is not in that deal like 15 to 25k.. if that's the case I think she is going to lose some dough.

That being said, I’ll bet you can still do it.

There's risk and cost involved if they have to foreclose.