Are there alternative courses of action that we could have taken?

I have an addendum that names the pet and details their responsibilities including instant repairs, licensing, flea treatment, etc.

@Dave Toelkes your correct it may be schedule C depending if he is considered a "dealer" in the business of buying and selling option contracts, but the better tax treatment in most case would be for him to be considered an "investor" not a "dealer" if he plans to hold the contract for more than a year and be taxed as capital gains.  

The only options are for me to wait around for months and persuade the seller (the bank) to file a variance with the local zoning commission, and hope that it's approved, or, i'll need to find alternative financing since no conventional mortgage lender will finance this property. 

Word's walk and money talks.I read some of this thread but it started getting too heavy.The reality is at the end of the day buyers can choose to accept the terms of the seller or the person offering the deal, reject it outright, or offer an alternative they feel comfortable with.If a market is super hot and a buyer wants to take a chance it's their call with their cash.

Alternatively, with a double close, you actually purchase and close on the property and then sell it to an investor.

Can you find alternate financing?

The most accurate picture will come from the form 8824 which your cpa files for the non-recognition treatment.  

b) offer to bring some of the above friends and family in as equity partners and share the gain (more returns for partners, more paperwork for all, less return for me)c) are there other alternatives I should consider to close my cash gap?

b) offer to bring some of the above friends and family in as equity partners and share the gain (more returns for partners, more paperwork for all, less return for me)c) are there other alternatives I should consider to close my cash gap?