The Missouri Supreme Court in Ethridge apparently stated that for equitable subrogation to apply, the party against whom the doctrine would be applied (USAA in this case) must have "engaged in fraudulent conduct or committed acts bordering on fraud that created the condition that caused the lender a loss." 226 S.W.3d at 134. 

So I decided to cut the loss, have the hard money lender take ownership of both properties so I could just walk away. 

My assumption here is that your paper return showed a loss for your rental, and thus you are being excluded from using that as income. 

I personally feel like the market will get hurt by job loss, but people that are looking to move to the suburbs for better schools for their kids, etc are still going to be in a position to do that and demand will remain high.

That is a lot of loss, and I would say you would probably come out ahead hiring security in that type of situation.

How high will the bad debt loss go? 

I'm testing my memory here and the link is saved on my old computer but I remember an article from about three years ago about their endowment exited a bunch of positions at a loss or at flat.

but if you rent it for  $1000 per month you will have a taxable income of: $4600 =12000 (rent)- 7400 (expenses)this is very very simplified ....there are loads of other deductions and costs you can apply to the rented side, and actually come up with a loss and save taxes.  

If I'm reading the various threads correctly, in the CARES act, landlords who have other primary work like a full time day job, and they are limited to treating real estate as passive income/loss aren't getting any benefit against earned income, because the language in the new bill looks like it only applies to "net operating losses"? 

To take a step further, you can also add a 3rd sub-account for the income/loss allocation to capture the tax basis balance as Lance mentioned.