If everything checks out, I would refund their deposit (minus any damages you're authorized to recoup per state law) and move on with life.

Tenants are very much like sheep, and I have it on very good authority (Matthew 9:36) that Jesus really set the pattern here.

The taxing authority is not going to settle for less ... at this juncture.  

In the book "What Every Investor Needs to Know About Cash Flow" the author talks about not just vacancy but also factoring in rent that you can't collect for various reasons, for example a tenant who refuses to pay but is still living in the property (not technically a vacancy).

What was interesting is he's in the same niche but he's playing different markets...and it wasn't just the local economy,  but local conditions like aggressive taxing authorities taking a bite out of what is healthy revenues.  

A pre-ordinance (built before July 8, 1957) residential building or building of mixed residential occupancy, not complying with the requirements in force and applicable to the building at the time of its conversion, may be altered so as to legalize one dwelling unit, in addition to the number of dwelling units originally authorized, providing that said unit was determined by the office of the zoning administrator or the zoning board of appeals to have existed prior to July 8, 1957, and provided such building complies with the other provisions of this chapter.

What's even worse is I'm told that I'm likely to get audited by the Japan tax authorities because I've listed a previously cash producing asset as suddenly having a gross income of $0 for the entirety of 2017, which is seen as a major red flag.Does anyone have any recommendations for what actions I can and should take given my situation? 

If you have an old lease authorizing attorney fees, and your tenant hooks up with the right contingency attorney, you could be out thousands if you act too fast.Last comment. 

Find out how I can go about paying the outstanding balance (I may need authorization from seller, in which case I would call and have him allow me to make the payment or whatever the case may be) (I'll find this out from the email I get back from their department I assume)10.

Henry, you will have problems collecting rent if people don't pay.In NY, units without C/O's are common, but it causes issues in evictions, and people can turn you in to authorities.