1031 exchange + 121 and a Big Boot

[Howei Yeh]

In this case study, I am seeking to downsize a rental through a 1031 exchange combined with a 121 exclusion and take a big boot.   

For context, the house will sell for about $1.6 million and was purchased for $600k. I currently have a $400k mortgage on the house. Closing costs on the sale, around $100k (numbers are simplified). 

My plan is to roll forward $1.5 million in a 1031 exchange, and I was playing around with splitting it into 3 buckets.
A. $500k - exchanged into a new rental 
B. $500k - "121 exclusion" boot
C. $500k - additional boot

I understand that A is tax-deferred and B is tax-excluded. My question is how do I conceptualize the taxability of C., the last $500k? I am not sure if it will be fully subject to capital gains tax. 

I thought that this A, B, C, blended solution would save on tax expenses and I would owe less tax than if I just simply liquidated the property without a 1031 exchange. Feel free to poke holes into my logic.

Why such a big boot? I would like to diversify my investments.

Although this is my first post, please don't pull any punches :).