@Steve DellaPelle You neglected to deduct any amount for the opportunity value of the equity remaining in your property.

I spent time on the phone with the CA FTB and Employment Development Department, and am still struggling to find the right way forward with our complex circumstances. 

It makes sense what you're saying about renting this one out and living somewhere else for awhile, but due to my current circumstances it is something I cannot do. 

It might be worth a quick check with an attorney to understand your liability and your obligations.I don't pretend to know anything about it, but having stolen goods installed, especially if you have personal knowledge of the circumstances can't be a good thing to be involved with.

If he can't pay rent, he should move out REGARDLESS OF THE CIRCUMSTANCES.

Also, no impact to your credit should you be the unfortunate victim of circumstance and be forced to default.   

The kitchen and bathroom need minumal work (it's fine as a rental) but it does need roof, foundation etc as those items were neglected by the previous owner.   

Some places are sensitive to fluctuations due to local circumstances. 

Now whether you should do so depends on the circumstances.

We will a lot of times just force the old LL to pay the amount on the lease as credit even if they claim they never got it, solves their neglect.