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I'm going to give you the quick answer now. Tonight I'm going to check my stuff at home and if I'm wrong or incomplete I'll repost. (I'm also going to CMB by saying I am an apartment owner, not an accountant.)

You don't ever "pay" depreciation. As you depreciated the property you reduced your basis. Capital gains = Sales Price - (Purchase Cost + Capital Improvements - Accumulated Depreciation), so when you pay the CG you are repaying the money you deducted on Schedule E over the last 7 years.
As far as the 1031 exchange, there is a rule if you want to delay CG, you have identify the next property in 90 days after sale, and close in 180. Then you can rollover the old basis into the new. A 1031 I believe requires you to swap the properties. Finding another person who has what you want AND wants what you have is complicated. I don't know if it's really necessary if you can time the sales and purchases accordingly. (Exchanges are not my expertise, so check with a pro.)

I am surprised you have been unable to get good advice. Any CPA and most general tax accountants should be able to address this. If you want to read up, go to They have about every form and publication you would want in pdf format. I think the ones that you want are Pub's 527 and 946, but that's what I need to check at home.

Why do you want out of real estate? My bank gives 3 year notes on real estate, so when I refinance I sometimes go up in loan value and take the extra cash and invest in other stuff. They let me prepay principal if I have extra and only make interest payments if I need some. Doing this gives me margin loans for about 2 percent below a brokerage. Debt can be good, if you are using the debt to grow faster than the interest rate. If you use the long term stock average of 11% and my loan rate of 8%, I can make 3% on money that isn't mine, plus the real estate gives cash flow and diversity. (of course, by learning at tmf, i should beat the 11%)

So there's my quick answer. I never said it was a short one! Good luck.
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