This is different than acquiring an investment property with the intention of holding for appreciation and rental income, which does get capital gains treatment, subject to 0%-23.8% federal rates depending on income and circumstances.

They can provide guidance based on the latest tax laws, regulations, and your individual circumstances.

If her spouse didn't file returns she must do so on her own.Respectfully but importantly, it sounds as though you spent too much time in your tenant's life and are now looking to "take care of her" the way her spouse once did and in the process trigger a bunch of taxes and frustration for yourself - trying to sort out a tenant's circumstances.

And these deals do not grow on trees you need to find specific set of circumstances to find them ( talk a seller into it) and have EQUITY enough to exit if you have a problem with the loan .

I was not sure about applying the deposit to back rent, as this is the first time the house is in as immaculate a condition as it is, so under normal circumstances I would probably be returning most or part of his deposit, and wanted to know could I legally apply it to the back rent.

2, yes, but what are the facts and circumstances? 

We originally planned to owner occupy the main house, but due to changes in personal circumstances rented the main house out 5 months after the purchase.

I am beginning my journey on cold calling absentee and out-of-state owners and if I could be 1:109 to start I'd be floored :DAgree with you @Jonathan Greene, I will be focusing on obvious signs of neglect from absentee / out-of-state owners or owners who are entering the later stages of life who may just want payments rather than tenants.

This is particularly important if the buyer plans to change the property's use or develop it further.HOA (Homeowners Association) Documents: If the property is part of a homeowners association, include the HOA documents, fees, and any restrictions.Right of First Refusal or Buyback Clauses: These clauses can be beneficial in certain scenarios, allowing either the buyer to sell the property back to the seller under specific conditions or the seller to have the first opportunity to buy back the property if the buyer decides to sell.Amendment or Modification Clause: This clause allows for changes to the agreement, should both parties agree, to accommodate unforeseen circumstances or adjustments in terms.Record Keeping and Escrow Services for Document and Payment Handling: Ensure there's a clear plan for how documents will be stored and how payments will be processed and recorded.

Just this week I filed an amended return for a client that used a CPA/EA who did their taxes and completely neglected to enter their passive loss carry forward (even tax pros often make that mistake).