1031 Construction Exchange for a house you already own half of?

[Andy Bastone]

I'm planning on selling an investment property (Property 1) that has significant equity to purchase a 50% interest of another property (Property 2) from my former business partner. I already own a 50% stake in Property 2, so I would own 100% of Property 2 after the exchange. My plan is to use the left over proceeds from the exchange to make much needed improvements to Property 2. 

My question: since I already own 50% of Property 2, can I use the 1031 Construction Exchange tax break to avoid capital gains tax from the sale? And if I can, is it worth the hassle? 

Some important notes, Property 1's value has remained basically the same. I bought it for $123k, it should sell between $119-125k. I have taken the depreciation deduction 4 of the 5 years, and I believe my tax basis is around $95-100k.  So after agent commission, my "profit" should only be around $13-20k.  

Another important note, Property 2 is worth about the same as Property 1, but if the improvements are made, they would significantly increase the value of Property 2, my estimations are between $50-75k. I currently owe abut $58k on Property 1, and collectively we owe about $97k on Property 2. 

Final note, I'm currently a student, so I barely made $30k in my side jobs. Most of which I expect to get back come April.