I'm trying to do taxes for a parent who has started to suffer from dementia, who has a rental property where the tenant was paying in cash. I found out the tenant has been taking advantage of this situation as I couldn't find any record of recent payments.
The question I have is how would you handle this situation when it came to taxes? Suppose I know for sure x months were not paid and y months were, and have no way to tell one way or another for the remaining months. Should I file with 12 - x months? Should I file for y months? Or some guess in between? If I get audited, there are no records except for y months (i.e. there are cash deposits corresponding with the rent amounts in bank statements).
The tenant was paying about 20% less than market rate as rent wasn't raised on him since moving there some 4 or so years ago and has been going month to month. So that's another complication, I'm not sure if it qualifies for fair market rent.
