The neighbors tell us that the taxpayer was going to move in but fell on hard times around 1 1/2 years ago and nobody has been in the house since.

From what I am reading, this may be an issue with the "same taxpayer rule."

Taxpayers that are eligible for this deferral are those that recognize capital gains for federal income tax purposes. 

If not considering a 1031, there is a small capital gain, already taking into consideration $250k (single tax payer) if I prorate the 1031 portion, does it mean that the capital gain will be higher if I prorate the rental portion?

Also, did you calculate your property tax payments based on the new sale price (a lot of new investors miss this one, thinking they'll just be paying the same property taxes as the former owner). 

If the LLC you are forming is a disregarded entity (meaning only one member, not filing a tax return, choosing to be taxed as a sole proprietor) then the IRS looks past the LLC and sees you as the tax payer regardless of who is on deed. 

This would avoid the recording tax and probably a reassessment as well.However, in general the tax payer needs to be the same on sale and purchase. 

Lenders and any creditor knows about them and believe me they get in line first in order to recover their interests in the properties and the owners who get behind on their tax payments are given very generous terms to also recover their properties and losses.

If so then that tax return is the tax payer for the property for 1031 purposes. 

Additional tax, penalties, interest for the taxpayer and disciplinary action on the preparer.