The property was completely neglected and needed a full renovation.

Thus, your fact pattern would generally lead to short-term cap gains, subject to ordinary bracketed rates.You should speak with your tax advisor as he/she will know your facts/circumstances and be qualified to really dial in advice.Note this answer would be different if you originally owned the property in question and sold to your friend on an installment sale.

Certainly a unique set of circumstances, however good on you for applying yourself and closing the deal.

The previous owner who was not paying the property tax likely neglected the property and the tenants.

I am not sure of the circumstances surrounding your judgement but it can be hard to collect anything. 

Even if a tenant has an eviction or collection, I'm unable to verify the circumstances or validity of those actions.

I'm reading Garret Sutton's Loopholes book and it doesn't offer suggestions for this circumstance. 

Does anyone have experience on this type of circumstance?

I like the foreclosures and feel good about making a neglected property liveable again and allow it to be someones dream home again.

I'm an optimistic person, but plans change with circumstances...it kind of sounds like your emotionally attached to this property.