1031 exchange on a property with promissory note

[Iris Wu]

I have a property with a promissory note from private investors. Would like to understand 1031 exchange rule to understand what is considered as boot that would be taxable. 

Here is the scenario.

The current property purchase price is $250k, promissory note is $450k, let's say the property sells at $1M. I understand that for 1031 exchange, I need to purchase another one that is $1M or higher in order to take all the tax advantages. But my question is about how to allow the investor to exit in this case without receiving a boot on my end. Is it that I'll purchase a new $1M property with all sales proceed, any then cash out refinance $450k afterwards to repay back the investor? Are there any other potential ways I could construct the deal so that I can do 1031 exchange without tax implication while still be able to exit investors?

Thanks in advance for the response,

Iris

[Bill B.]

As long as the note is recorded against the property. Which any reasonably intelligent lender would do as collateral. Just in case you failed to make payments. It would have to be paid off by title during the selling process. Before the QI gets the remainder.