In this situation you wouldn't be able to use the property to create a tax loss. 

However, With substantial management changes as noted above, to force appreciation and ROI, we could expect vacancy turnover and potential loss in eviction initially.

@Carlo Con  When using Schedule E to determine rental income, you don't take 75% of the result to determine your net rental income or loss, so that is not correct.  

Are tax sales only for those lucky people who can just deal with a million dollar loss?

They make lot's of money but you get  a bigger loss and a headache.Years ago I had a much bigger issue on a purchase come up with a larger property.

You can carry your loss (NOL) from year to year but I know a limit does exist so be sure to check with your tax preparer.I highly recommend that if you are getting into flips (and you are doing more than just one every here and there) and want your taxes to be correct, I recommend sitting down with your accountant.

If you need some guidance on this, I recommend Dave Ramsey's Total Money Makeover program.Your current equity position is not sufficient to do much for you, and the loss of the depreciation, appreciation and monthly cash by selling, as well as the costs to do so really just compound your situation.  

I know they say not to buy counting on appreciation, but this is Seattle area after all, not a town in Ohio with 1% appreciation gain.Then again, if the price drops I'm stuck with it or I sell at a loss.

Tenants may choose to leave when ever they wish regardless of the term of the lease and landlords must chase them down or abandon the loss.

It's self evident, there would be no crash if people were able to repay their loans.The mixing of merchant banks and retail banks (another Clinton change and Gordon Brown in the UK) exacerbated the whole problem, because central banks now had to prop up merchant bank losses to protect the retail banking sector.