She claimed to have filed a law suit against the Real Estate agents stating that she was coarsed into selling her property and other charges including harassment.

Totally legal here, but would take from 2 - 6 months if the tenant files a dispute with the rental board.* My offer was for $650,000I did not think they would actually take the offer at that price, but was hoping they would counter.Their reply came back - NO, no counter and mentioned they would not do the eviction for owner possession either.The buyer in 1st position should have their subjects removed by Saturday the 25th.I will submit a revised offer of $700,000 on Friday 24th, so at least they know there is someone who is genuinely interested and hopefully they will counter with something.I believe the building needs $200,000 in work to restore it to about the same condition as my building. 

My accountant has told me that I will always have to file tax on this type of investment as ordinary income rather than capital gains no matter how I structure it.

I disagree that an amended return is required to be filed.

We gave them a 60 day notice to vacate (required in Georgia for month to month) and then filed an eviction when they didn't pay.

Also, most title companies (in larger counties) will e-file...especially if they're on the hook for the gap period.

Creating an alternative LLC just for passive just adds expense as you have to file taxes for that entity, etc. 

Eventually the title company is likely going to file an interpleader action after deducting legal fees and expenses incurred in doing so from the deposit. 

Is it worth pursuing my landlord policy for the claims adjuster to go after their insurance or filing a lawsuit? 

Otherwise you will need their E&O information so you can file a claim and have this fixed.