Tax question on an owner occupied HUD

[Account Closed]

I am looking at buying an hud house for 41k and investing another 40+k, I will be living in the home for somewhere between 12 and 24 months. I know after 24 months I have nothing to worry about, but what if I sell before 24mos? Will I pay tax on the difference between what I bought it for and the sale price, or will it be on what I bought it for + the renovations and the difference in sale price?

I assume the house will sell around 115k once complete so will it be...

115-41=76 (paying tax on 76k)

or

41+45=86

115-86=31 (paying tax on 31k)