@Grant Huggins The IRS language is as follows:  If a tax exempt entity engages in a trade or business on a regular or repeated basis, then UBIT applies.A single flip on rare occasion mixed into a portfolio of largely passive investments would not "likely" be subject to UBTI, with the caveat that the IRS has the final determination should they choose to take a closer look.  

As to that option price; 10% is the usual tipping point for residential option prices, the IRS has disguised sale limitations, some states have adopted foreclosure requirements for equity being established under any arrangement of an installment sale.

I received the following email earlier today from NAR reguarding the IRS wanting to eliminate 1031s.

As for other liens that survive, these can be: IRS-under special circumstances (under 120 day redemption period from deed recording).

Since it is my wife and I that are the owners/members of the business, the IRS sees us as a disregard LLC.

However, I noticed that the previous owner has a $20k IRS lien on him.

The question you ask is a very good one, and the best answer can only be provided by you CPA after reviewing your specific situation for the past along with plans for the future, as there could be specific deduction choices that once you make it cannot be reversed in the future unless you get permission from the IRS.

Will an IRS Lien survive a Tax Deed Foreclosure Auction sale?  

Just report on you schedule b, you will probably get a computer generated letter from irs asking why you did not report 1099 int with associated ein just write them back provide a copy of the schedule b, and explain it is a "disregarded entity " and the 1099 improperly used the ein instead of your ssn.  

Ok my understanding is that repairs and improvements to get a property fixed up so it can be put into service as a rental are added to the basis of the property per what the IRS says.