My decision is going to be to reduce the tax basis in each property by the amount of the settlement recovery which will then be reflected in the gain or loss on disposition (i.e., greater gain on sale due to a lower tax basis) if/when I sell each property.

So, De minimis is always better than section 179 or bonus 50% depreciation.The “de minimis safe harbor election” may be particularly useful when it comes to year-end planning, as it is available for qualifying assets even if they are bought and placed in service near the close of the taxpayer's tax year.If you are over the limit of 2500, the bonus depreciation (50%) is better than section 179 because there is no phase-out.Bonus depreciation is changing to 100% next year but we should always use de minimis because its an expense compared to depreciation that is subject to recapture.Change passive activity to non-passive:Step up material participation hoursSale of passive activity: If a you dispose of your entire interest in a passive activity in a fully-taxable transaction, than any loss from the activity for the tax year of disposition (including losses carried over from earlier years) will be non-passive.

High earner should generally invest 85% in the safe market and 15% of the aggressive market ( start-ups).3) If you have rentals and are such a high earner, you can hire your children so that they don't have to pay taxes on some of your income ( limited to standard deduction) or pay them more than the standard deduction and they still pay fewer taxes.4) You can time the disposition of the rental property right so that when you have very high income in a year, you can dispose the rental property and use all the suspended passive loss that you were not allowed to take because of your high earnings in the prior year ( this loss can be substantial)5) if you plan it right, you can convert some of the personal purchases to rental expenses ( lawn mowers, Ipads, laptops you get it)6) some of the vacation travel might be planned right to make it a business trip and get tax deductions.There are much more.. ..

Did the disposition of unpaid rent and the security deposit come up with the seller during purchase negotiations? 

Even in the double closing situation, It’s hard to imagine this event being construed as a real property disposition, especially if you have no right or custody to the sales proceeds of the property per the terms of the contract (though I’m not familiar with how these are worded).

The normal SD disposition letter and move-out lists that you use as well of course.  3.

You truly know what you are doing all the way from acquisition to disposition.

Using an engineered firm, that breaks down all assets (straight-line and short life) offers significantly more benefits, ability for retirement/disposition, and protects you in the unlikely event of an audit.Most forms offer a free Feasibility Analysis, so that you can determine the cost-benefit analysis.

This will cause you to recognize the loss on the remaining basis of the carpet which could be subject to limitations based upon the other items and possible dispositions included on your return-Steven the Tax GuyYour guide to IRS laws, rules and regulations.

Your intent establishes that this transaction is a dealer disposition.