The OP said it was his personal residence for 14 months, that's not an investment per IRS and does not qualify for a Section 1031.IRC Section 121 applies to personal residences, totally different rules, must live there for 2 of the last 5 years (btw thats what you should do @Eric DeVito) single people get $250,000 capital gains tax free, $500,000 for married folks.

I recommend you speak with you tax professional to stay within bounds of IRS rules.  

if you don't, the IRS will find a reason years from now to disqualify your tax sheltered account.Good luck!

If I refi my houses and pull out more money, wouldn't it be better if the IRS let us reset our tax basis again?

@Vic Vega, The IRS gives you a tax deduction called "depreciation allowance" which is 1/27th of the value of your residential investment property.  

I also used to work for the IRS and I have taught accounting and tax on a college level. 

They do this to keep buyers from "loan hopping" to someone else.Now when you get a different loan rate mid deal you might have to get the seller to extend your purchase contract or lose your EM if you can't close in time.

Most of these projects take less than a year which means they are considered as Short Term Capital Gain.I would like to know if anyone here know what are the taxes that needs to be paid for such a deal. i know it says that it is according to my annual ordinary tax but i dont pay any taxes in the US as i dont live there nor I am a citizen.i hope someone here has the answer :)thanks Jonathan, as far as I know if you are generating income in the USA, you are liable for US tax and need to register with the IRS and submit annual returns.

You can also ask for a copy of Schedule E of the seller's tax returns, with SSNs and other properties blacked out, to see what they tell the IRS the cost of utilities, etc, actually is.Whatever the sellers claim rents, NOI, etc, is, you can go ahead and disregard those numbers.

No, the IRS won't let you.