you may want to provide a few more specifics but assuming you mean you bought a house improved it, and sold it all in the same 12 months and not through a company.... then yes the gain is taxed as 'Active' income and is treated similar to w2 income for tax purposes. this rate will be higher then say, rental income which is passive.

or(2) For asset protection purposes, I will be setting up 2 LLC's.

Mine have told me that that specific purpose is not allowed and literally told me to lie about what I'm using it for.

I've read not to disclose the exact purpose of the money because they will not loan the money if they find out you are using to buy a home.  

I wrote the above for informational purposes.

Make sure you explore these possibilities on your due diligence process & what to do on your exit strategies if the scenario changes on what your original intended purpose would be - residential housing. 

My purpose for getting my license was to first give me more education about the real estate industry since I am still fairly new to this field, and to also be able to have the access that having a license provides you.

I also agree that DTI is one of the many causes under the umbrella of underwriting but I can't say it is the main cause and my point to you - is in this thread anyway you haven't convinced me - not that is your goal or purpose here.

The reason is that you are allowed to deduct a lot of items for business purposes that you can't as a person only.

Therefore you will need to use transaction funding which purpose is to provide you with funds to close on the front end.