Hi, I have client who bought an investment property (Property A) from a property managment/Real estate company for X amount of money. The management company rented it for the client, however for whatever reason, the tenant never paid any rent, and when served to vacate the premises, trashed the property prior to leaving about six months later (all in the same tax year). The client quit claimed the  property (A) back to the management company for $10.00 and the management company quit claimed another property (B) in my client's favor for $10.00.

Is property A considered a sale of property for $10.00 and considered ordinary loss (Not a real estate professional) the difference between the original purchase price and the sale at $10.00? What about property B? Is the basis then $10.00? No section 1031 involved.

Please help me figure out how to report the transaction in proconnect tax and for tax purposes