They would have to figure out how to reconcile that to report a property that they havent been reporting.So basically there's a mis match between who the IRS perceives to be the tax payer for the property (you). 

If no damages are found the tenant would get back 1/8 of their deposit (~$160).

At closing, I received the security deposits and pro-rated rent but was denied the non-refundable pet deposit.

Was there a security deposit?  

Most of the unit has a reddish brown/auburn style wood appearance flooring (that I wouldn't be able to match exactly), so I'm wondering what to go with to replace the kitchen flooring?  

Just be direct with your tenant and tell them about the report and either have them pay the pet rent and deposit you usually charge or tell them to get rid of it.  

. :-)@Todd Rasmussen -- I may just have to keep that in mind and see if any of my upcoming adventures match with ones you've run into!

I wouldn’t do it without a significant deposit and rent agreed to.

They will go cheap, not someone who can do the repair who is able to match the wood, satin, etc. and who is licensed, bonded, insured, etc. 

I know this is not necessarily big in my area but check with a lawyer about an estoppal agreement which is essentially a document that allows the tenant to verify lease terms that way if after you purchase it they cant come to you and say their rent was cheaper or their security deposit was much more than what the seller told you.