Each year, I make a prior year non-deductible IRA contribution and then convert to a Roth IRA - i.e., backdoor Roth.  

@Larry T.Flip income is not as tax friendly as buy and hold income.Flip income can be subject to federal income tax, state income tax and self-employment taxes.You should have benefited this year with the 20% qualified business income deduction.

Per AZ law you need to take action to market the property at fair market value, re-rent the property and you can deduct the cost of re-renting from the tenant's deposits.

If I am understanding correctly if we sell it now profits would probably be considered ordinary income but we could directly deduct all the rehabbing. 

Important you consult  your accountant,  but it's my understanding you use the Heloc strictly for the investment & do not mix personal use with the investment use so the interest is tax deductible. 

This way everyone is on the same page so if you need to deduct from their security eventually you have a clear paper trail.

@Arthur WillieThe assignment fee adds to your cost basis and would be a deduction for tax purposes The assignment fee should be on your settlement statement just give to your accountant.

Having someone specialized look at the gives you the best shot at making sure every any any deduction is taken, and they can tell you if there's money back to be had.It could be a matter of errors, or communication issues, not getting the right documents. 

Its entirely possible they arent paying taxes on it and liens are being levied by the town against the property.

That's the difference in your example, you'd be the one offering consideration and your landlord receiving it.As it's a business lease, most likely the consideration you offered to change the lease would be a deduction for you.The landlord would report your consideration offered as taxable income and relet the floor space given up to make himself whole (or better than whole for his time and effort).