We're getting back on our feet but we missed/were late on many payments for the rental, which ironically is the major reason my credit is so bad at the moment.

@Josh EdelsonHopefully she is amending your return at no cost if this was missed by her.Given that you have properties in MO, IN and SC may expose you to tax filing obligations in those states. 

So now, when I go to the bank to get a home loan I would have a bad credit score to start with because of using good chunk of HELOC credit (either I would end up with a bad interest rate or my loan or not get a loan)Am I missing something here ?

Also, if they have owned for a long time and don't plan on buying more rentals ask them if they will miss the monthly payments coming in. 

So now, when I go to the bank to get a home loan I would have a bad credit score to start with because of using good chunk of HELOC credit (either I would end up with a bad interest rate or my loan or not get a loan)Am I missing something here ?

Most accountant's miss this step as they don't have k-1 investment experience.Regarding how it will be taxed, each k-1 syndication is different. 

Am I missing something here, or with my strategy is this a no-brainer? 

I learned a while back that it doesn't make sense to argue with someone when they are drinking.  

Let me add the info I missed - the property is located in WA state, and of course I would like to keep the main tenant or actually both and give them a chance for a fresh start together. 

Then they tell me that they could do it in commercial if they wanted to but haven't tried (and thats where the heated discussion takes place because everyone keeps saying that its possible in theory but nobody is doing it successfully) I feel like I'm missing something.I dont mean to sound like a pessimist or a jerk, I actually want to be proven wrong which is why I'm posting this.