This is certainly a question for your CPA, however, the 1031 exchange is for investment property. Your second home is a second personal home which you probably were claiming the interest from your mortgage on your taxes. You are allowed two personal homes – since you did not rent it or claim as a rental(?) makes it exempt from any additional taxes. The mortgage interest from your second home was a write off on taxes, 1031 exchange is to defer income from a sale on investment property.