@Charlie GruberThe following IRS link also covers the 401k loan rules.https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-loans

In Tax deed some of the liens NOT wiped out - HOA, IRS. 

Hop on the forums and give back to those starting out.

I just found that one property I'm interested in has an IRS lien on it!  

Any advice on how best to correct this with the IRS?  

All things equal LLC is always a better option it takes just 2 forms to start one (one for IRS one for the state) but I believe the op is asking if it is kosher and if there are any special steps to take before setting up an LLC while still having a mortgage on the property in his name and also residing at the property. 

I guess I just don't understand why those two LLCs are viewed differently, but perhaps it's just the way the IRS views real estate investing vs. small business investing.So with suspended passive losses, how far do those carry forward? 

My point is I don't want the irs to say at the end of the year where did this "30k" come from originally?

The third option is to sell and pay a boatload in taxes, which will reduce the amount of money you have to play with in addition to writing some painful checks to the IRS and FTB.I've been in your situation and done some commercial RE and oil investing out of state through syndications. 

That should be enough to get your started but if you need help sleeping at night you can read IRS Publication 527 here.