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Recess cabinet in old chimney space?

We have an old chimney from a hot water heater (which was moved to the other side of the house) which I would like to cut into to recess a cabinet into the space. The chimney, which has its own foundation outside the house, goes from the window level of our english basement through the roof above the second floor. I would like to remove the first floor section, and leave the rest due to major repair costs for exterior stucco and roof. Is there a safe way to do this?

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