That would eat into your profits.

I took my profits and used it to open a business.

Again, offering some dollar amount to make it ok, might get you some cash in hand and head off an issue.I wish you big profits!  

Harsh Singh Short answer is that the 50% rule should cover everything but debt service and profit.

@Basit Siddiqi, thank you for your response.Just to be clear, out of the 40K recognized as profits to the LLC, I can deduct all closing costs thus reducing the tax burden to me when it moves as ordinary income to my return?

You were a 5% owner if you owned (or are considered to have owned) more than 5% of your employer's outstanding stock, outstanding voting stock, or capital or profits interest.And yes, you can use depreciation to offset other income, but the amount of depreciation you can use is going to be based on passive income rules. 

Concepts I think I understand are :If the transactions are not of equal value you, you pay capital gains on unused profit. 45 days to identify deal of equal value / 180 days to purchase them. 

However, if you aren't intending to return to the area and don't see a positive (in $$ terms) exit from the property (enough to make you want to keep it) than I would cut your losses/take your profits and invest elsewhere.As for purchasing in a new area...if you intend to stay in the area then buy nice house for your family.

As soon as start profiting from Rehabs then I'll be diving into rental properties as well! 

According to my estimates, this would result in a gross profit (cash flow before mortgage payment) of about $65,000 per year, which is just over $5,400 per month.