For future reference, how I handled it when I bought at an auction is a friend who is also an investor did the bidding, bought it, put the down, and then 'assigned' it to my IRA at closing.

This will reduce the VA funding fee which is just PMI payed upfront.

If you are holding the property, pebble may be the way to go as plaster will degrade faster and show wear faster so you may end up redoing it, or future buyers may see that as a reason to reduce the price to “fix the pool”...

I'm looking for any insight on how others with a similar situation handled it for tax purposes. 

Unused contingency funds, unless they were received directly from the borrower, must be used to reduce the outstanding balance of the renovation mortgage after all of the renovation work has been completed and the certification of completion has been obtained.The loan is not re-amortized.Draw Schedule: The HomeStyle program has a maximum 4 draw process.The initial draw can be up to 25% of the total project and can be for materials for the project.The final draw will be at least 10% of the total project as retainage and funds will be released upon receipt and approval of final inspection, Certificate of Completion from Appraiser, signed All Bills Paid Affidavits and Lien Waivers.Additional Draw Information: Signed Draw Request by borrower and contractorSigned All Bills Paid Affidavitreview and approve the draw request and will release funds for disbursementA check will be issued in the name of the borrower and contractor and delivered to borrower via USPSAn inspection of work to date will be performed at 50% completeFinal Draw Information: Signed Draw RequestFinal inspection/Completion Certificate will be required for release of final fundsA Title Update showing property free from lien or encumbranceGeneral Contractor’s Lien Waiver AffidavitAffidavit of Completion GMG will review and approve the draw request and will release a check in the name of the borrower and contractor.Change Orders and Cost Overruns: Changes to the initial plan are not permitted unless prior approval by Gateway Mortgage.

I want to be hands off as possible, can a property manager handle all the headaches full-time.

If you do this definitely find out how to "cloud" the title, and get a lien so that they can't just back out on you.If you are going to make improvements while on an option, see if you can negotiate those expenses into a reduced price for the house.

Screening is intended to reduce risk to the lowest possible level.

I have gotten conflicting advice from the professionals so trying to make sure I’m handling things appropriately.  

How do you normally handle reporting this?