1031 Exchange Debt Replacement - is it mandatory?

[Jay Peacock]

I am selling a rental house that I have used as a rental for 20 years so I have a lot of capital gains.  I intend to do a 1031 Exchange and buy another house which will be as a seasonal rental.  I would intend to rent it out on VRBO by the day or week during the season and use it some weekends for personal use.  I only have about $30K in mortgage left on the property but have it under contract for about $260K.  I would estimate my capital gains at around $200K.

Question 1: Do I have to replace the mortgage debt when I buy the replacement property?  I would rather not and have cash I can use if I buy something for more than the proceeds of the sale.

Question 2: Could I buy a less expensive property (say $150K) and just pay taxes on the difference.  I have some long term capital losses I can offset this with.

Thanks in advance!