Fix up/Rehab an old Rental House and "Flip" to 1031 exchange?

[Will F.]

We have an old rental house that is not generating the Cap I'd like.  

I think that if I rehabbed the property new kitchen, landscaping etc, it could sell for a lot because the area is highly desired.  

Would it make sense to rehab the property for a couple months, list it, and 1031 exchange it for a multi-unit?  Would the capital gains taxes be 100% tax deferred?

How does this end up being paid if I eventually sell the multi-unit that I 1031 it into?