Appreciate the excellent breakdown... the last time i did a 1031 it was more cut and dry since and the HELOC wasn't involved. 

Factoring that in makes things pretty cut and dry.   

The property stayed dry with the exception of a couple low spots.

There were added costs – Closing and title cost - $188,000 (that seems excessive, but whatever)Lender and acquisition finance costs – $1,189,000 (maybe that’s mostly points – doesn’t say)3rd party reports and due diligence - $118,000 (again, whatever)Legal costs – 402,000 (really?)

There are Specialty policies (often referred to as Excess or Surplus Lines) that should be able to write coverage.  

Picking your market isn't as cut and dried as as you would think.

The property is valued in excess of $340k in early 2021.

My understanding is that AMT is meant to prevent tax evasion from excessive write offs. 

He recently lost all of his tenants at once because the FBI raided them relating to medicare fraud and writing excessive prescriptions for oxi.

If your client has already cut sheetrock and dried up the place then you are golden.