"Can I simply sell it and walk away with the windfall tax free?"
No. At the very least you'll have to recognize the depreciation recapture, taxed at ordinary tax rates. But the mechanics of the calculation of capital gains doesn't mean "I'm in the 10% tax bracket - ignoring my LTCG - so all my LTCG is tax-free." As long as all your "other" income plus LTCG keeps you in the lowest two tax brackets your LTCG will be taxed at 0%. But as soon as the sum of other income plus LTCG breaks through the upper limit of the 15% tax bracket, the excess will begin to be taxed at a 15% rate.
Of course the rates cited here are the "statutory" rates, not the "real" rates that you might be assessed with you actually enter the sale. Our tax code is so larded up with numerous phase-outs, phase-ins, surtaxes and hidden marginal rates that the actual increase in income taxes with the entry of the sale could be much higher.
Tom Young
