Well it seems like you could just let them out of the lease, but then you have turnover costs, including time on market to find a new renter- meaning you're going to absorb loss is possibly because of this.

If there is a loss and you want to preserve those losses to offset income when you exit out the deal, probably file. 

However, the money I’d save by not paying $3500/month mortgage is $42,000 after 12 months – thus recovering the money paid on the capital gains tax.QUESTION: would you advise selling the rental to pay off the new home and take the $1400/month rental income loss (and gain $3500/month savings) or would you advise keeping the rental?

So I have kept renting it out since then, taking a loss every year (rent did not cover expenses of taxes, insurance, maintenance, mortgage payments) so never any cash flow from it.

I'm guessing appreciation and mortgage paydown combine to give you greater wealth building than this $7200/year loss. 

First, you don’t need REPS status for the STR loss benefits.Second, REPS is a double edged sword.

I have zero empathy for you and if it was my property might sue you for the loss of the tree, and in any case I would evict you for your actions.  

We will be moving cross country and not involved in the management much so I don't think we can claim those losses. 

Usually insurance companies only cover loss if the property is uninhabitable.

The bank from my understanding will be writing off a loss on this loan as there is not enough money to go around.Here is where it gets interesting, there is a second lien on the properties from a seller of a hotel that the current owner of the 21 unit bought seller finance. obviously there is not enough money to get this guy paid off as the bank is already taking a loss.