Is it OK to payoff a mortgage just prior to doing a 1031 exchange?

[C. J.]

If a mortgage is paid off right before selling the home, can we exchange all the proceeds of the sale with no tax consequences? 

For example, suppose a home is worth $400,000 with a mortgage of $160,000. If the mortgage is completely paid off, then the next day the home sells, can all the $360,00 in proceeds ($400,000 - $40,000 in costs) be used to 1031 exchange with no tax consequences (assuming the next home is worth $360,000 or more)? I'm just wondering if there are any issues (mortgage boot, for example) with paying off a mortgage right before selling and doing a 1031 exchange.