1031 exchange and inherited property

Dear 1031x: I am part owner of a house that I inherited from my father.  I have never legally resided in the house myself.  Probate Court gave me a share of the house in the  mid 80's when my father passed away. After the Probate Court made me a co-owner of the property, I signed over  my share to my aunt in a life-estate agreement, so she could remain in the  house for the rest of her life.  My aunt was placed in an elder-care facility in late 2004, and the  life-estate agreement was terminated on that day. So I then again had  control of my share of the property.  Now the house is finally for sale with a  broker.
 My plan has always been to take the proceeds from the house when it sells  and buy a small home for myself in the midwest.  Now I learned I may be subject to a  capital gains tax because I never actually resided in the house myself. Is there a way the 1031 or any other section of the capital gains law  takes into account a house that was passed down from family members as  part of a parent's estate? Or will I need to buy out the entire house and  move into it for two years to qualify for exemption from capital gains  taxes?
Thanks for any help you can give, no one else seems to know the answer to  this.

Dear W:  Your inherited property is 1031 exchange eligible because you have held it for investment.  However, the property that you propose to buy is not 1031 exchange eligible because you plan to live in it.  For a 1031 exchange to work both old and new properties must be held for investment. Yes, you could move into the inherited home and live there for two years making tha tproperty 121 eligible.  Sorry there is not a perfect solution for you.  Sincerely,

Steve Hickox
Attorney / President