I made my parents some money on their retirement funds, and was able to recover approx 93% of all funds invested.

So not much of loss on their part unless the lease has 11 months left.I am interested to see what others have to say.

In reference to @Peter Walther post about foreclosure, the following is copy & pasted directly from the State Bar of Wisconsin Form 11-2003 Land Contract:"Purchaser agrees that in the event of a default in the payment of principal or interest which continues for a period ofdays following the due date or a default in performance of any other obligation of Purchaser which continuesfor a period of days following written notice thereof by Vendor (delivered personally or mailed by certifiedmail), the entire outstanding balance under this contract shall become immediately due and payable at Vendor's optionand without notice (which Purchaser hereby waives), and Vendor may singly, alternatively or in combination: (i)terminate this Contract and either recover the Property through strict foreclosure or have the Property sold by foreclosuresale; in either event, with a period of redemption, in the court's discretion, to be conditioned on full payment of the entireoutstanding balance, with interest thereon from the date of default and other amounts due hereunder (failing which allamounts previously paid by Purchaser shall be forfeited as liquidated damages for failure to fulfill this Contract and asrental for the Property); (ii) sue for specific performance of this Contract; (iii) sue for the unpaid purchase price or anyportion thereof; (iv) declare this Contract at an end and remove this Contract as a cloud on title in a quiet-title action if theequitable interest of Purchaser is insignificant; (v) have Purchaser ejected from possession of the Property and have areceiver appointed to collect any rents, issues or profits; or (vi) pursue any other remedy available in law or equity.

You may be able to offset the taxes losses on the new property.

Did you have to prove loss of income for this?   

If you want to take the QBI deduction or an ordinary loss you better be issuing 1099s...

Whenever there is an insurance claim on a property, it will remain in a national property claim database called the Comprehensive Loss Underwriting Exchange (CLUE) for five to seven years.

Or can they be written off as a loss/break even"?

Costs Non-recurring Closing costs - 6% of purchase priceMonthly  % Vacancy and Credit Losses - 5-10% of monthly rent Property Management Fees - 8-11% of monthly rent Real Estate Taxes - actual from folio # Repairs and Maintenance - 5-15% of monthly rent Rental Property Insurance - 2,000 Homeowners/Property Association Fees - 0 Capex reserve - 1% of purchase price Utilities  Water and Sewer - tenant Gas and Electricity - tenant  Garbage - tenant Cable, Phone, Internet - tenant - tenant

Unless you form a C Corp or elect C Corp status (both generally not advisable), you will have a pass through entity so the tax on your cut of the profit/loss will be calculated on your personal 1040 tax return.