Owner Financing for an invetmest property, capital gain, 1031 ex

[Shahnaz B.]

I have an investment property in Baltimore City/MD. I paid $90,000 for the property in 1987, it is paid for. I do not know the value of the land vs. structure at the time of the purchase nor do I remember the "closing cost" at the time I purchased it. I suppose if necessary those numbers can be estimated. According to the recent tax record the accessed value is $323,000 (land: 100,000; improvements: $223,000). I was thinking about listing the property and if my capital gain tax would be "too high" do a 1031 exchange. I already deducted most improvements (e.g., new roof, update kitchen, etc.). I depreciated $3326/years (for 27 years). Before I get to list the property (for $329,000), I received an offer with owner financing as follow:

- As is

- $300,000

- $40,000 in 6 installment : $5000 for six months and then $11,000 the last month (an extra $1000 because of the installment)

- $260,000 in loan 5% interest year with amortization of 10 years +

- he pays all closing cost

- will sign a paper to turn over the dead after 4 or 5 month none payment (he said he has no problem singing it because that will not happen) ... is this called security deed or warranty deed or something like that?

- this will be under a LLC name which has their current house and will have a personal guaranties as well (from him and his wife)

Of course we will have lawyers to draw all papers but wondering before getting lawyers involved (or even do a counter offer) what kind of documents I should ask him to see (that he indeed can afford this deal) 

I live in DC and my effective federal tax is 15%. I addition to federal, who do pay the "state " capital gain - to DC or MD? What is the current % for capital gain tax? in what rate I will have to pay the depredation I took out?

I suppose this kind of the deal complicates my 1031 exchange intend but how would that work anyway - thanks