Why the deferred gain is so much less than the recognized gain

[Stanley She]

I bought a rental property 7 years ago for $198000. Last year, I sold it for $400000. For the sake of simple discussion, let me ignore all purchasing and selling costs. So, my gain is 202000. Within one month of the sales, I purchased a like-type property at $265000. I would think that all my gain of 202000 is ALL used up in the new purchase... not only that, I have further invested more in order to purchase the new property.  By that, my recognized gain should be 0, and all 202000 should be deferred gain. 

But, the tax software is telling me: my recognized gain is 400000 - 265000 = 135000! The deferred gain is only 65000. 

Which is correct, mine or the software? 

Anyone can enlighten me? Much appreciated in advance.

Stanley