Basically, so long as the property was available for rent and you were actively trying to get it rented, you can deduct your expenses and it's not an issue. However, I do question why you were unable to get a renter in the property for an entire year. Depending on the location and time of year, I can see it taking 3-4 months. But to be advertising a rental property for a year or more with no takers, raises my eyebrows. I don't know if it would raise flags with the IRS, but I would expect it to if you show expenses for a year, with zero income for that same time.
