I can give you my point of view which is from the borrower. 

What will be tax consequences for borrower of rental house giving property back to lender through deed in lieu with following situation.(1) Lender issue 1099C , No deficiency judgement.(2) Lender don't issue 1099C , No deficiency judgement.

With a commercial purchase you need to be aware of the qualifications for borrowing money, and the same thing would apply when refinancing it. 

You can borrow from bank (signature or Home Equity) private money, hard money or even put on a credit card.Then you wouldn't have to worry about the pool liability or tenants.Maybe your In-laws would front the money?

I'm seeing I/O loans coming back in the market and this is a GOOD thing...for responsible borrowers ONLY! 

Have you considered contacting a commercial broker to assist you? 

Assisted living/independent living or bed and breakfast, airbnb, etc.

Like you mentioned, you can even use it for Assisted living facilities (ALF) but an officer ( I think Fire marshall dept) will need to inspect and provide Certificate of occupancy. 

No pets and non-smokers.Property Info:3 Bed2.5 BathAttached Garage1976 SFBuilt in 2006 (has been vacant since 2011)Property is in excellent conditionHOA responsible for all exterior maintenance and repairsIn a well cared for 300 unit development Property numbers:Into the property for $127k (currently borrowed at 5%)Current Property Value = $165-170k ( the property will be worth more as soon as the lawsuit is complete) Annual Property taxes = $5400Annual HOA= $2400Insurance = $800What should i do?

The numbers above seem to make you a competitive buyer in the current FL 2018 market so I will actually buy something at that price with a 12% interest hard money loan, get it rented, eat the negative cash flow for during the seasoning period, and ultimately refi through a regular bank down to 5%.I will list the property addressI will list the bank used for refiI will put up my deal analysisMy property management search infoMy experience as a hard money borrower (Disclosure, I am a partner in the lender I will be using, but for this project, I will pay full freight as if I was a beginning borrower)I will put up all my expenses on the projectWhy should you pay attention to this thread?