As a fellow North Carolinian, in addition to most of the comments above, I'd recommend you check out our state law governing contract for deeds.

It's with the government.

Actions define the application of the law.Of most importance, can you afford to defend yourself in a lawsuit should a seller, buyer, licensed real estate agent, real estate company, lender, local government agency, or a state government agency sue you for your actions?

I see where you have referenced tax penalties as your basis, we are not the government nor can you tie any justification in lending to what the government gets away with.I suppose the initial issues Dion pointed out still exist.

From something as small as the marginal brackets changes to something as large as the government deciding not to allow interest deductions or changing depreciation schedules, you never know what can happen over 5, 10, 15, or 30 years.These are the big reasons why many investor completely ignore the tax implications of their investments -- there are too many unknowns and if anything, the tax implications are likely to be worse in the future than they are today, so if you factor today's implications into the equation, your actual results are more likely to be worse than that, not better.

According "Rich Dad" if you cant file a 1031 it would be considered 50/50 income (50 percent for you 50 percent for the government) Also I do all my deals under my LLC.

Everybody does have their hands out especially the city government.   

I once had an offer declined because we missed one check box on the physical contract.During the time that the properties are listed as "Exclusive"  only government agencies, non-profits, and owner-occupants can submit offers.  

@Patricia Franciulli I see houses being rehabbed all the time, I know there are some community organizer types that have raised money from local governments and businesses to fix up certain neighborhoods.

Fannie/Freddie are government entities that buy loans that are written to their standards.