Thanks for using JustAnswer.com. I will do my best to provide a clear and concise answer to your tax question based on the information that you have provided.
Do you live in the condo, rent it out, use it as a second vacation home, or do you rent it out short term and use it as a vacation home?
If you live in the condo or have lived in the condo for 2 of the last 5 years that you owned the condo, any capital gains would be tax free up to 250,000 (or 500,000 for a married couple). However, it doesn't sound like this was your primary residence.
If this is a property that is used a rental property, a section 1031 exchange would be ideal and would work out as desired.
If this is a vacation rental (one that you rent out short term and use personally for vacations) the section 1031 exchange can work. However, there are some personal usage rules and rental period rules that would need to be followed. The property you sell must have been rented for 14 days or more at full market for each of the two years prior to the sale, and the new property must also be rented for 14 days or more for the two years after the purchase of the new property. Further, you cannot use it for more than 14 days per year for all of the years involved. (the two years prior to the sale, and the two years after the purchase).
If this is a personal second home only, the gain will be fully taxable at the applicable capital gains rate.
If this is held in a living trust where you are the grantor, the income will reported on your individual tax return and be applied at your individual rate and there would be no need to take it out of the trust. Is this a revocable or a non-revocable trust?
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