1031 Exchange to a lesser value property

[Jerry Chen]

Hi, I have some questions on 1031 exchanges that I need to know before I make my next investment decision and I'm hoping somebody can help me with.  Here's my situation:

I have two investment properties: A condo which I bought for $95K free and clear in 2009 and used it as a rental property.  I later on did a cash-out refinance for $125K in 2016.  Now I have a mortgage of $125K and the condo is worth around $325K.  Is it allowed for me to use 1031 exchange to purchase a duplex for around $200K?  Assuming after all the fees and costs associated with the exchange, I still have to pay $25K out of pocket.  Will I have to pay an additional capital gain tax?