The time period to hold the deferred gain has passed. The gain should not be taxed due to the deferred gain being held (by not selling the 1031 property) the required period of time. Now, it seems to me, the gain needs to be recognized (e.g. added to shareholder basis).

What time period?  The deferred gain doesn't just expire.

What time period are you using to defer gains?  Are you perhaps talking about a 1033 exchange?