so the only way to mitigate my losses from cap gains is to live there for one year and one day?

I feel that if I don't sign it for 6 month I will loss the contact and start all over again.

The rehab was completed in Mar 1984, and after several failed attempts to sell, including a sale to a buyer in July 1984, and then the buyer got a mortgage approved, then loss his job, then the mortgage company rescinded the mortgage approval.

The effect of the 1041 rule is to defer a taxable event, recognizing a gain or loss, until the recipient, in this case your wife, disposes of the property.

So if the current tenant assigns the lease to the new franchisee, my view was that the new franchisee wouldn't be able to form a new entity and stick my friends restaurant in there (perhaps with other stores operating at a loss) rather than the new franchisee's larger entity/portfolio.

Im guessing here the best course of action is to limit your losses as best you can and concentrate on managing past this thing. 

I know some other LendingClub. investors who are experiencing losses (I didn’t, because I invested in only the most conservative notes) .  

So if he gets hard money lenders at 12%, which I think is high, how does he manage to make his payment to investors, would he not be short on a monthly basis, thus the whole project will be a loss?

@Chris PurcellMake it cash flow all night as well in order to compensate for the real loss in property value as explained by  @Russell Brazil  , should you have a zero appreciation property.

Rental Agent shall use its best efforts to ensure the operation of all amenities in the Property, such as internet access, satellite or cable TV access or fireplaces as applicable.Rental Agent shall not be held responsible for such items failure to work, but will make every effort to correct any issues as reported as quickly as possible.Guest acknowledges that use of amenities such as fireplaces, lake, dock, decks, and the like may be potentially dangerous and involve potential risks if improperly used, particularly with regard to children and such use is at the Guest’s own risk.Guest shall use the Property for residential purposes only and in a careful manner to prevent any damage or loss to the Property and keep the Property in clean and sanitary condition at all times.Guest and any additional permitted guests shall refrain from loud noise (especially after 10PM) and shall not disturb, annoy, endanger, or inconvenience neighbors, nor shall Guest use the Property for any immoral, offensive or unlawful purposes, nor violate any law, association rules or ordinance, nor commit waste or nuisance on or about the Property.DEFAULTIf Guest should fail to comply with the conditions and obligations of this Agreement, Guest shall surrender the Property, remove all Guest’s property and belongings and leave the Property in good order and free of damage.No refund of any portion of the Total Rental Fee shall be made and if any legal action is necessary, the prevailing party shall be entitled to reimbursement from the other party for all costs incurred.ASSIGNMENT OR SUBLEASEGuest shall not assign or sublease the Property or permit the use of any portion of the Property by other persons who are not family members or guests of the Guest and included within the number of and as permitted occupants under this Agreement.