Those numbers do illustrate my client 1031 and explain it to me.

1. 100% of the gain rolled over is transferred to the new basis - for the two DSTs only.

2.  All the cash used to purchase the QOZ is deferred gain because it has gone into the QOZ funds. 

3. The 400K is then reported as the deferred gain on the Form 8949.

Point 2 is interesting. $400K is taxed because it is boot and means it is capital gain eligible for the QOZ deferral provision.