Use rental income to keep you in the game while time does what ever it will do plus there is debt reduction for most standard mortgages.John Corey

Any reduction in debt or cash received may be treated as taxable boot, resulting in potential tax liabilities.

I know this might be a hard pill to swallow but what about selling and paying the tax and Tbill and chill for awhile have you calculated it out just so you know the tax consequences and have it as a viable option?  

You are correct, if you set a cap or IRR that is outside of market rates for your investment matrix, then that is your purview and you may pass deals at Fair Market Value.If the market no longer supports the rents, then the investor will request a tax reduction or the assessor should already adjust this and the taxes will be based on market cap rates and market rents.

We had to ask for a $100,000 price reduction and tweak some lease terms due to an iffy roof report.

I sold an office building last year and the buyer "retraded" after their inspection when they discovered that 6 of the 8 AC units were about 20 years old and were near the end of their life.They estimated the need to eventually replace the units to cost in the $50k+ range and asked for a $50k reduction on the purchase price.

The $190k tax, which is Federal only, is a pretty hard pill to swallow.

For example, if you put 20% down, and the property appreciates by 5%, then you've achieved a 25% return on your investment ($100k down on a $500k property that appreciates to $525k turns your $100k investment into $125k of equity), and we haven't yet counted income or debt reduction. 

Could this situation be a cause for a price reduction (to add gas)? 

For the past several weeks we've been averaging rent reductions on about 10% of available lease inventory every week.