You might see if there are any such interests on the secondary market that you could identify and buy.Purchasing Tenant-In-Common interests, Delaware Statutory Trust beneficiary interests, Land Trust beneficiary interests and other "disregarded entities" qualify for 1031 Exchange treatment, but Section 1031 of the Internal Revenue Code specifically excludes any kind of partnership interests for 1031 Exchange treatment. 

We have looked up city code and a garage is not considered a living space.

But, from the phrasing of the OP's post, he likely doesn't know the things to look for that most note buyers know.....like another thread here where someone is buying a note for $2k, then finds out there is over $20k in back taxes and city code violation liens, on a boarded up house in who knows what condition, and quoting value off of neighborhood comps(in perhaps good condition?)

The only way you will know what can and cannot be done is to seek the advice of a geological engineer (as to the stability of the land) and a structural engineer (as to the feasibility of rebuilding the house or making the necessary repairs to bring to current code) Obviously you will need to check with Planning and Building Departments to make sure there are no restrictions, etc., However; if there are other houses in the immediate area, it's probably buildable. 

@Michael KhakshouriThe maximum net passive loss allowance is set by the tax code at $25K.  

Section 121 of the IRS code has examples but does not provide examples where the gain is in excess of $500K, so I am trying to get a clear understanding of how to manage the distribution of the gain.

Now, I'm guessing you're a single member LLC and are likely going to be a disregarded entity, and thus this provision of the Code would apply (To state tax filings, not necessarily federal tax filings, consult a CPA, I would recommend Mr.

In fact (I don't have the code in front of me), look through the TREC rules and it specifically states you can sell your interest in a deal if you have equitable interest.  

I had a 5 bedroom home in Katy, Texas 77449 zip code.

Prompted by this thread I finally got around to reading the fire code on testing of smoke detectors.