Will the IRS see this as purchase money and will the mortgage interest be tax deductible?

@David LutzYes it still may be possible to take another loan if you have had one in the past 12 months under the same plan - you would need to work through the multiple loan rules and possibly consider the relatively recent IRS guidance on the topic. 

no, IRS liens and their redemption of 120 days completely separate from foreclosure Redemption

Plus it will protect you in the event of an IRS audit.

Here's a helpful article for you from IRS site: https://www.irs.gov/businesses/small-businesses-se...There're actually experts that specialize in 1031 exchanges.

Get ready to hop-scotch.

There is an IRS safe harbor at 2 years. 

Generally the IRS considers purchasing something that will last longer than a year or improve the value of a property to be a capital expense.

The IRS views this as a benefit to me and not for the good of the IRA.

@Bryan Pham Since you're exploring 1031 options, keep in mind that in addition to go forward the traditional way - sell first then buy, you can also do it backwards - identify your replacement property then sell your existing one as long as it it within the IRS allowed time-frame.