As long as they get the votes and the taxpayer funded salary and health insurance plans for their family, they are going to continue to pass legislation like this. 

As taxpayers are not doing these folk any favors by giving them a free pass through life.

Or have they just shifted the losses to the US taxpayer?

This is what our CPA says:"The rental real estate loss allowance is a federal tax deduction available to taxpayers who own and rent property in the U.S.

The estimated cost per tax payer is $2,000.

The real answer to your question is that you cannot deduct unpaid rent unless you are an accrual basis taxpayer and you had already included that rent in a prior year's income.

'@Brian Christensen, Changing tax paying entities for the real estate you are selling right before a sale is a recipe to invite scrutiny and have your exchange disallowed upon audit.The IRS is extremely skeptical of transfers such as this immediately prior to a sale and the beginning of a 1031 exchange.  

The reality is that they've made up their minds and their goal is to spend as many tax payer dollars fighting for this in the courts as possible so that they can declare a victory against the evil landlords.

A deed from the taxpayer is proof, whether it was recorded or not, as long as properly signed and notarized.

That way the taxpayer remains consistent through the 1031.