1031 Exchange - Master Lease Option

[Nathan H.]

Hello BP Community,

I’m working through structuring a creative real estate deal and am wondering if/how I can exchange the proceeds.. 

I bought a house with appx $120,000 of 1031 money + about $55,000 of additional funds for with a 700k purchase price. I’m now wanting to sell that house and 1031 again. My best offer is a creative deal with someone buying the house subject to the mortgage or wrapping it and paying cash for my equity. I don’t understand the risks of this well enough, so I’m going to propose a master lease option instead with similar terms to simplify things. 

If I can make the risk of loss pass to the buyer with a lease that has sufficient terms, can I 1031 exchange the option money? I know option money isn’t typically taxable until the option is exercised, but I want it to be taxable prior so I can 1031. Does anyone know how this is achievable, or am I looking at this the wrong way? Maybe there’s a better way to do it.

Thanks in advance