You might consider other strategies, like taking a home equity loan or refinancing to fund repairs, but consulting with a tax professional or CPA would be the best next step for your specific situation. 

There are many tax accountants on Bigger Pockets that can help you with your situation. 

I would have just filed a lawsuit against them and took it from there.This situation is quite complex.

Selling and buying something else you want keep and doing a cost seg in would help with the tax burden probably better in this situation.

However I do have a few other ideas but I would need to know a bit more about your situation, timeframe, overall financial objectives.

I have had previous requests for help with this situation, and that's the advice I consistently offer.

It all really depends on your overall situation and your investing strategy.

Also reviving this thread, in a very similar situation as @Stephen G. 

Evaluate the situation to see if you could have done anything differently to mitigate the loss and implement changes to your processes, but know that this happens and hoepfully just not too close together. 

You can tell the tenant that they can ignore the notice as long as they follow through on paying.As the landlord you want to maintain control of the situation - not allow the tenant to do so.