Dealing with unknown rental income

[Omar80]

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.

[macuser_22]

It sure sounds like this is mot of a legal issue then a tax issue.  I would suggest consulting a tax attorney that deals with real estate in your area.

[Omar80]

Sure, I understand from a legal standpoint the tenant is liable for not paying and may be evicted.  For various reasons we aren't able to pursue that (mainly lack of time due to dealing with bigger issues), so my question is from the tax standpoint only here.

[Mike9241]

FMR is not an issue unless the tenant is related. however, how much to report is. you only report the rent collected but you don't know exactly how many months. thus, this is an issue that should be taken up with a tax pro.

[macuser_22]

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@Omar80 wrote:

Sure, I understand from a legal standpoint the tenant is liable for not paying and may be evicted.  For various reasons we aren't able to pursue that (mainly lack of time due to dealing with bigger issues), so my question is from the tax standpoint only here.

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Tax-wise you report the rent that was actually received.  If a loss then you cannot claim that on tax and must recover that through legal means.

[Carl]

Report the rent that can be proven by bank deposit records that was received. That's it. For months not paid, it's less than $200 (in the state of FL at least) to file for eviction and back rent. Just make sure you include your court fees in the filing.  I've had to evict more than once, and never used a lawyer. Generally, when the tenant gets the first summons, they either move or pay up. Only once have I actually had to go to small claims court, and the tenant lost of course.