I reserve a room at the Marriott for a weekly rate of $1,400 nonrefundable payment at time of reservation.  After five days there is a fire that knocks out hot water and power to my room, so they move me across the street to the Hilton which charges $300 daily rate.  Marriott refunds me $600 of what I paid them.  I have to pay tax on it?  I have to give them my SSN for a 1099?  Absurd.  

A lease is property.   A tenant has basis in it.  If the landlord is not able to perform and refunds part of the cost, that's not income.  What's so difficult about that?