The entire purpose of a 1031 exchange is to defer the gain on the sale of property when you buy another property to replace it. If you have a lease with an option to buy, you do not own property in which you have a basis. So there is no reason to do a 1031 exchange.
Once you exercise your option to purchase and then you own the property, you will have a basis in the property in the amount of your purchase price plus any costs of the transaction. Then, you can do a 1031 exchange to sell the property and use the proceeds to purchase a new property, so long as that makes financial sense.
Always use a reputable qualified intermediary when doing a 1031 exchange and always use the services of an escrow agent or an attorney in completing the transaction.
May 11, 2015