If your IRA owns an ongoing, revenue producing business that is not "housed" within a C-Corp. or other taxable entity, then the business tax is paid at the IRA level in the form of UBIT. 

Does it make the most sense to write off something in the same year only if it helps reduce the current taxable income?

The increase of the basis will help you minimize the taxable gain when you eventually sell the house.2) Improvements made on the rented side will also be added to the basis, but you can depreciate the improvements on the rental side and deduct depreciation against the rental income.

It is our job to maximize deductions and reduce taxable income.

You are not co-mingling taxable money from your business with your retirement account are you?

So the excess 200k is boot and taxable- A very common outcome in simultaneous direct exchanges.You can still accomplish the sale as planned and defer all tax. 

@Chris Coleman A cash out refi is not a taxable event.

A nonresident alien individual or foreign corporation which during the taxable year derives any income from real property which is located in the United States and, in the case of a nonresident alien individual, held for the production of income, or derives income from any interest in any such property, may elect, pursuant to section 871(d) or 882(d) and this section, to treat all such income as income which is effectively connected for the taxable year with the conduct of a trade or business in the United States by that taxpayer.

Is it possible to sell the rental and have the money distributed to me in a note over a 5 year period so that my capital gain tax is reduced since im retired and have no income and would fall into a 0% tax bracket up to 70k in taxable income a year??  

You can only setup Solo 401k if you are self-employed or own a small business with earned income, it is not for everyone.If you wish to convert to Roth IRA be prepared to pay the taxes since this would be a taxable event.