Tax consequences of vacant real estate

You've been told wrong. If you are a cash basis taxpayer, and most individuals are, you can only deduct expenses you have actually paid. You cannot deduct lost income. On the other hand, if you are an accrual basis taxpayer, you would have reported the income when your right to it was fixed and determinable. In that case, a failure to collect the cash would represent a deductible loss (returning you to the same position as the cash basis taxpayer who didn't collect the rent).

Ira Smilovitz, EA Leonia, NJ

I see. In the case I have in mind, the lease had expired, so there was no expectation of rent.

Any difference for corporate owner/income tax?

Well, most corporations do accrual rather than cash accounting, but it doesn't make any other difference.

Thanks Ira, John. Now the question is whether to tell the friend who told me otherwise. He might not like being wrong. He's a retired lawyer, but not tax law and he never owned a business, or property other than the co-op and later the house he lives in. But he said this deduction was something people had complained about for years, as if he knew what I was asking about.

I wouldn't bother, unless he specifically asks. He's unlikely to believe you anyway.