Typically, investors agree that you should hold the property for 12-18 months as a rental in order to appease the IRS and prove your intent to hold it.

The taxation does not typically add up to much, and the IRA will definitely see a benefit from leverage and a higher cash-on-cash return as a result.If a deal is 60% leveraged, then 60% of the income is UDFI and taxable, and you then get to apply the same 60% ratio of all normal deductions like depreciation, interest on the note, etc. to reduce the taxable amount.The topic is covered in IRS publication 598, and a conversation with your tax advisor before moving forward would be wise. 

Can I do this with any IRS?

(IRS likes to see 1 year)

Both would qualify as ordinary and necessary.That said, if I was asked to defend this $35k rehab in an IRS audit, I would pass.And now to Eamonn's mention of paying a royalty.

There are a lot of theories about how to do this floating around now, but they run the risk of getting sideways with the IRS.  

Relocation assistance may be considered incomeand may be reported to the IRS on Form 1099C.• The property is being sold in “AS-IS” condition.

As such, your business can expense the cost evenly each year for the useful life (27.5 years per the IRS) of the property.

He told me not to file at all since we had no income and the IRS wouldn't be happy if we claimed deductions without rental income.  

Might trigger IRS issues because it exceeds the gift tax threshold.