I think you're focusing on the wrong thing. Debt isn't for tax management (well, it can be, but only in cases such as borrowing your living expenses when you're sitting on tens of millions of dollars), it's for leverage.
Certainly, paying taxes sucks, but you don't pay taxes without income and I'd rather get another dollar of income and pay tax on it vs not getting that dollar of income and giving it to the bank instead so I can avoid paying tax on it...
As some others have said - get a tax pro to look at your situation and maximize that, then focus separately on what to do with the cash.
For the cash, the question is simple to me - what does your written IPS say? Don't have one of those? Then that's the reason you're here on a board asking what to do. Go put one of those together. It's a whole separate subject I won't address here.
In summary, if your IPS says you need more equity exposure, then put your $700k there. if it says you need more RE exposure, then put it there. If it says you should leverage your RE, then use it to buy more, if it says you should de-leverage your RE, then put it there.
Having said all that, it's clear you are uncomfortable with the risk you have, so the my advice without knowing anything about your IPS (very dangerous, for you) is to pay off debt.
