All your profit on the sale of the flip is taxable as ordinary business income subject to self-employment income taxes no matter what you do with the proceeds of the sale.   2. 

Some background on my personal finances I contribute the maximum amount that my employer matches on my 401kI am making contributions to a taxable investment account with a 40/60 allocation as a safety net.

My TAXABLE income (military base pay + rental income from another property) is less than the income requirement of $72k for USDA loans in the area. 

@Ali QudsiUnless you are some not-for-profit organization - you will be required to pay property taxes.There are some instances that you buy a newly developed land/building and the county strikes a deal with you that you won't have to pay property taxes for X years but will ultimately have to pay them once the period is over.You can decrease your taxable income related to rental properties with depreciation.

They could rent it and wait two years, but if they sell it now they will take the taxable gain.  

Are you deliberately buying negatively cash flowing property in in order to try and lower your taxable income? 

Your 121 exemption would only apply to the gain/profit on the last transaction....all prior deferred gain would become taxable.

Don't merge into one taxable property. 

., taking a taxable distribution); you usually can't have it both ways where you keep tax deferral but also get to spend the profits. 

Look into doing a rollover to either a self directed IRA or a ROBS 401k (Roll Over Business Startup), perhaps you delay the taxable distribution.Good luck.Carol