But since the IRS can look back up to 7 years for an audit, that's not really helpful, and the IRS is also rumored to not be satisfied with spreadsheet downloads.

It's a budget friendly option to some of the other services, and they have engineers on staff + audit defense, but the more expensive cost seg companies ($1500-2500) will actually do walkthroughs of your property via Facetime to more granularly estimate components of your structure. 

This actually might be illegal of your CPA to suggest since they can't do/suggest things for the primary purpose of manipulating the audit regime of the IRS as it violates our code of ethics.

Have free energy audit done by your electric company5.  

The three tests outlined above are applied annually, so you may qualify as a real estate professional in one year and not in other tax years.It is also very important to document material participation.To meet the requirements of real estate professional status, it’s essential to keep detailed records of activities and time spent working on the properties so you can verify your real estate professional status in the event the IRS decides to audit your return.For example, you may keep a contemporaneous appointment book, calendar, or narrative summary of the time spent performing real estate activities.

While using a QCD may encourage the Clerk to accept the deed for recording it won't help if the DOR decides to audit the information provided with the conveyance. 

Unfortunately, their deduction was disallowed following an IRS audit and a subsequent visit to Tax Court.

I worked in both residential and commercial real estate where I audited properties in NYC and other cities across the country. 

- I realize that this maneuver will likely increase the risk of audit....curious to get a sense of how much more risk of audit I will face and does the IRS typically just audit the one year or would they dig into previous years as well?

They would have audit, exam and compliance issues with having a foreclosed junior, and successor non-obligor behind them.