You need to determine if you are an
Investor
or a
Dealer in real estate.
You can only handle your real estate the way you have been in inventory, if you qualify as a dealer.
When you qualify as a dealer, your inventory sales are ordinary income. See the IRS definition:
You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. Rent you receive from real estate held for sale to customers is subject to SE tax. However, rent you receive from real estate held for speculation or investment is not subject to SE tax.
Learn more here: https://www.irs.gov/publications/p334#en_US_2016_publink1000313359
If you do not qualify as a dealer, keep in mind that you'll be required to increase your adjusted basis in the property, by the amount of depreciation you should have taken. You have 3 years to amend your returns for a refund.