A 1031 exchange enables you to defer the taxable gain if you roll the proceeds from the sale into the purchase of another property using a specific procedures. 

In the 1980s I rented (not owned) a house in Seattle and quite successfully sublet a room (with the landlord's permission) to medical school graduates (MDs) who were doing their externships with the University of Washington Medical School.

I fell behind on some things and had super high medical collections.

That being said, I have helped a 911 dispatcher, bank manager, medical device salesperson, car salesperson, state trooper, and a mailman to name a few build their dual career to more than $4 million+ in closed annual volume.

Is there a discrimination concern or a procedure or exception(s) to follow in order operate as such? 

You really need someone to look at the documents you have, what they say, and pit that against your local laws and procedures. 

My goal would be to protect my home from personal creditors, ex medical bills.

Two of the safe harbors that can help you deduct improvements are below:1) 2500 de minimis safe harbor.the safe harbor applies to amounts paid during the tax year to acquire or produce what the regs call a “unit of property” (UOP), you must meet these requirements: (1)you need to have written accounting procedures treating as an expense for non-tax purposes amounts paid for property costing less than a specified dollar amount (which will be 2500 for you), or with an economic useful life of 12 months or less;.(2) the taxpayer treats the amount paid for the property as an expense on its books and records in accordance with its accounting procedures. ( do this on your bookkeeping software or whatever you utilize)(3) the amount paid for the UOP doesn't exceed $2,500. as substantiated by the invoiceNote: The cost for the Unit of Property includes l additional costs (for example, delivery fees, installation services, or similar costs) if these additional costs are included on the same invoice with the property.2) Small taxpayer safe harbor: To be eligible for the safe harbor, the total amount of improvements for the property for the tax year may not exceed the lesser of $10,000 or2% of the property's unadjusted basis.If the total amount paid exceeds the safe harbor threshold, the safe harbor does not apply to any amounts spent during the tax year.

My name is Tony Schlader, and I currently work full-time for a large medical company. 

Unfortunately I was injured pretty badly and was medically retired from the military recently.