First I agree .... talk to your lawyer and if you don't already have a tax attorney to help with your income tax return I HIGHLY recommend you get one of those as well and let them direct you in the matters of an income tax return. You may need to file your return without the rental income and amend later but again seek qualified local council. Technically you did have income & expenses on the properties, the fact that the net was not put in your pocket due to the embezzlement doesn't change that fact however how to handle the theft is another matter so heed your attorney's advice.
