Is a 1031 Exchange allowed in this case, and if so, is it worth the hassle?

[Anca R.]

Posting for my elderly parents.

Background: my parents bought their house in 2001 for $355K. In 2016 they moved to a one story home due to aging and ended up renting their initial home. Every year the rental has been depreciated by $11,700/year, so for the past 9 years that would be about $105K in depreciation. They are getting ready to list this house for sale in the next few weeks, listing price is $1,075,000. The plan is to use the proceeds from this rental to buy another rental property for about $650-700K, plus to pay off the home that they live in now ($260K owed).

The dilemma is: 1. Would the IRS allow them to benefit from a 1031 Exchange if they would be "swapping" a million-dollar rental for one that is much lower in price? 2. If so, is it even worth it? Would they be able to defer a good amount in taxes, to be worth the hassles of the 1031 exchange and the time constraints on the purchase? 3. If they don't do a 1031 how much would they have to pay in taxes after selling their rental? Roughly? Their combined income is below $100K per year. If it matters, they now live in Oregon, current rental is in California, and the new rental will be purchased in Illinois. TIA