If it's an exercise in math, we can go there too, another hypothetical question..... :)  

Later the tenants turned into tenant-buyers and then exercised the option a year later.

Exercise caution.

Quickbooks does not allow importing CSV or Excel PM transactions; so, you will have to purchase a CSV to QBO converter on top of this exercise...crazy.Most CPAs and bookkeepers just manually re-key each transaction and owner's pay the price tag.

For this exercise, let's assume it's $50K total.3.

We kept the 3's, but just exercised a little constraint.

I want to help you have information to make your decision, but really don't want to spend 10 hours working on a detailed estimate only to have you exercise your termination option.

And that's the mental exercise you can go through to see just where your tolerance level is for paying tax vs the deferral route of a 1031.  

Based on what I've read here on BiggerPockets, it seems that the IRS's 120 day right of redemption period is merely a statutory right that the agency has not/does not actually exercise(d).Would it even help me as a 3rd purchaser of a property at a sheriff's sale to start the demolition phase of construction during this 120 day redemption period? 

But maybe structure it so that some or all of the rent and option fee are credited to purchase if exercised.