Your reinvestment targets for a 1031 exchange would have you purchasing $700K of replacement real estate using all $500K of equity. 

If you wanted to do a 1031 exchange down the road to use that equity and trade up then that'd be a good idea.The homes I’m looking at buying are in the 330,000-350,000 range.

So yes you can exchange it to save capital gains taxes on $266k plus 19 years of depreciation recapture.

Or any amount of cash you take out from the exchange are considered to be profit. 

Use 1031 Exchanges to Defer TaxesIf you’re selling a property, a 1031 exchange allows you to defer capital gains taxes by reinvesting the proceeds into another property.

the note is converted or exchanged for credits?  

I have it all set up for a 1031 exchange and I am now under the 45 day countdown.

I BELIEVE you can only exchange the real estate portion of your business.

While my husband and his ex make a similar income and do not exchange child support due to us pointing that out in court a couple of years ago, she actively request all financial documents that she possibly can and examines our taxes, etc. 

., commissions, fees) and consider a 1031 exchange to defer gains by reinvesting in another property.This post does not create a CPA-Client relationship.