My question: What do you suggest for the best way for me to handle?

The IRS wants something in writing: the appeals officer asked under what authority should the lien be considered in the distribution, then denied the appeal when my CPA suggested we compare it with the distribution amount if the property was sold and the note was called due.Other similar like-kind distribution examples would be helpful to.

Finding a real estate-focused tax professional and one who can help with advisory and grow with you would be my suggestion to focus your efforts on finding.

So are you suggesting you're better off without insurance on the property?

If anyone else has dealt with these issues, and has any helpful suggestions for paths to pursue, please respond.

They had suggested using a trust to hold the asset and I like the idea! 

Suggestions are helpful! 

I suggest you calculate your monthly return from appreciation.  

Any suggestions for me before I set everything up?

We are familiar with the strategies you have shown on your video as well :) Finding a real estate-focused tax professional and one who can help with advisory and grow with you would be my suggestion to focus your efforts on finding.