Good tenants are wonderful things, and I'd say that while I have a few triggers that are absolute no's, I'll also slide towards the side of my good tenants when the decision becomes a judgement call, or "gut feeling".  

No-I did not hand him a shoebox and the taxes were no more complicated then the previous and subsequent year.   

If so, you have two options.... let it slide and give them the idea that rules dont Mayer and they can do whatever they want with your property without consequence, or enforce the lease and tell tell them what rules have been broken and of the terms of the lease are not adhered to, they will likely face eviction.

The building department refused to issue an occupancy permit, and he subsequently lost the property.  

I don't think it slides into the D classification. 

The issue is that I bought a property that was falsely advertised and now I am watching my wonderful numbers slide into more dismal territory.  

I agree with Jon Holdman that what Jodi Melssen did will not stand up in an audit; if there is no audit then that might not matter ...Now, if Michael Siekerka does a rehab that is subsequently rented, then sells that property after it was a rental - that scenario would become eligible to be considered as a relinquished property for a 1031 exchange IMO, because that rehabbed rental property was not inventory, it was an investment.

Since you inherited the situation, you should consider increasing the rent to at a bare minimum "fair market" and just a bit higher after the subsequent renewal.

If you have enough space to slide drywall in between the stud walls (even if vertical or half sheets), it is worth drywalling the face of the opposing wall after you have filled the cavity - for sound, if nothing else.  

Also, if the entire account balance of a Roth IRA is distributed and the IRA owner later makes contributions to a Roth IRA, the five-year period for qualified distributions does not start over with the subsequent contribution.