Many thanks to rbynaker and qbteachmt.  A quality discussion and good references.

I did give the values of the total additional costs and the amount of costs incurred within the twelve months of the sale in my first post.  The value left off was the original purchase price of $318k (I don't have the exact number in front of me at the moment).

The taxpayer is not in the business of flipping and has one residential rental property and one commercial rental property.  The total time period was about 2.5 years and in the interim years, costs were incurred and recorded in order to be capitalized.  There was no reporting of rental income nor rental costs in the interim as it was not in a condition to be rented.

Income is income (just the classifications change).