Is it taxable income? 

This would normally be taxable but because you qualify for 121 your accountant puts that exemption against the boot.2.

If you sell for $160K and buy for $90K there is a potential taxable boot of $70K.  

That will be taxable as long term capital gains - 15% (plus state, if applicable).Keep in mind the tax bill, which passed the house, changes the 2 of 5 to 5 of 8, so you would need to stay 3.5 more years if that change become law. 

I am doing a 1031 Exchange and want to verify the portion of the gain which is taxable.1.

Yes, you can expense the equipment under sec 179, but remember that you need to have taxable income (Not just cashflow but the income ) to take this deduction.And you are right, you have to recapture the sec179 depreciation not just when you sell it but also if the use of the asset goes below the 50% business use.

And when you sell you incur a taxable event. 

So while it reduces your taxable income, it will help your qualifying income. 

@Justin Y.If to you "tax shelter" means any method of reducing taxable income, then you may be focused on the wrong reason to invest in residential rental real estate.There are three advantages to investing in rental property:  Appreciation, Cash flow, and Tax benefits. 

@Michael Gessner In regards to taxable income/deduction perspective - I am not sure if it makes a difference if you keep the the fix and flip business and contractor business separate or as one entity.Example 1(combined) - You purchase a property for $40,000 where you pay $10,000 for supplies and sell for $100,000.