Sale of rental house frozen due to divorce

[Russell Sherman]

I have a single family house that was used as our primary residence, then held held as an investment rental after we moved into another home. The former residence was subsequently rented from 2018 to March 2021, when the tenant vacated. At that time my intent was to sell and use the 121 exclusion and 1031 the gain into DST's. However, at that time my former spouse sued for divorce and the court froze all assets while the divorce was pending. Last month the divorce decree was issued and I received the rental as part of the settlement.

How does the IRS treat property frozen by court order?  I clearly qualified for both the 121 and 1031 at the time the temporary court orders were issued.  I clearly intended to sell the property, listing it with a realtor twice.  Both times we received formal offers, but my former spouse and I could not agree on how to divide the proceeds.  However it has been over 12 months since it was rented due to the pending divorce.  Does that recharacterize the property from a rental?

I am waiting to hear from a CPA.  In the meantime, I want to assemble a team to help with my transactions, but I do not want to waste anyones time.  If I can’t do a like-kind exchange I won’t sell due to the capitol gains tax, over 500k.

The divorce decree lists the property as a rental, and when I transfer the title into my name it is recorded as a rental.  

Any thoughts?