It sounds downright unpatriotic prohibiting ordinary folks from investing in real estate like that.

@John T. try this;One idea that I have read about, but never known anyone personally use it is this;Depending on tax brackets for ordinary income (interest) and capital gains, adjust price/rate as needed for best tax treatment.

Private  lenders, are non-professional lenders ( your uncle, colleague, uncle money bags down the street)   They're just ordinary  people who want in on the real estate action but don't have the time to find and manage deals.

Very productive, all working, schooled, no jail time, good tax paying citizens.  

It appears that you bought the property to flip it for a profit.In this case, your profit is Schedule C, ordinary business income (not capital gains) and also subject to the payroll taxes (FICA and medicare).

My limited tax understanding would lead me to believe that this would be taxed as ordinary income, not capital gains.

:)A qualified real estate professional is a taxpayer who owns at least one interest in rental real estate that:- Performs more than 50% of their personal services in real estate trades or businesses in which they materially participate, AND- Spends more than 750 hours of services during the tax year in real property trades or businesses in which the taxpayer materially participates.Thank you,Azin

take the depreciation, because it lowers your ORDINARY income, which is at higher rates (up to 35%) versus CAPITAL gain which is up to 20%.

I just don't think I want to have my rent paid by taxpayers while I still have a mind that works great and should be able contribute to society in some way.

That's taxable at ordinary income rates, maybe with SET.Fix and flips make no sense if there's no work to do.