Cash refinance and than 1031 how it works ?

[Ran Fridman]

Hello guys, we plan to take cash out refinance from one of our houses that are paid off ( no mortgage) and then 1031 exchange sale.  

Appraisal for our house value $ 200,000

Step # 1 - Cash out refinance $ 140,000

Step # 2 - 1031 sale of the house for $ 200,00, so we pay back $ 140,000 to pay off loan for Cash refinance.

What happens with $ 60,000 left do put in escrow or third party and now we need to buy new property for $ 200,000 or higher to avoid capital gains tax?

Thank you in advance for response.

Ran