1031 Exchange Debt Replacement - is it mandatory?
I am selling a rental house that I have used as a rental for 20 years so I have a lot of capital gains. I intend to do a 1031 Exchange and buy another house which will be as a seasonal rental. I would intend to rent it out on VRBO by the day or week during the season and use it some weekends for personal use. I only have about $30K in mortgage left on the property but have it under contract for about $260K. I would estimate my capital gains at around $200K.
Question 1: Do I have to replace the mortgage debt when I buy the replacement property? I would rather not and have cash I can use if I buy something for more than the proceeds of the sale.
Question 2: Could I buy a less expensive property (say $150K) and just pay taxes on the difference. I have some long term capital losses I can offset this with.
Thanks in advance!