They expect a government handout while they drive cars that look better than mine, get expensive hair and nail treatments, and generally sit around all day.

With regard to the unit, even for rental properties, I think it's critical to stage the unit with reasonably nice, and color-coordinated furniture that allows the prospective renter to "visualize" living there.

But I take your point.I'm guessing that the townhome qualifies for the "2 out of 5 year" rule for preferential tax treatment which is one more reason to sell it now.I don't like being a long distance landlord, I sold all of my rentals before I moved 200 miles, so I wouldn't keep it unless you KNOW you might move back and re-occupy it.Your math analysis is correct.

Many people WILL pay regular income taxes on the net income you earn, but others will receive passive income treatment.

You can get capital gains tax treatment if you sell it after living in the house for 2 out of 5 years (READ: KEEP AN EXTRA $1000+ FOR EVERY $10,000 IN PROFIT).Make it nice (visit your neighbors that have nice looking houses), not over the top, and take care of the house while you're living in it.

I tried hard to buy in Biloxi/Gulfport for the go zone tax treatment.

My wife thought I was bad.Since you're not taking advantage of the favorable tax treatment for "flipping" your primary residence you'r paying a bit too much in taxes.

William,This transaction will not qualify for 1031 exchange treatment.

You have to learn not to react to this type of treatment.

The advice rendered is generally that your 1031 exchange has failed and will not qualify for tax deferred treatment; in short, it’s taxable.