Many investors have inquired about the primary differences between a 1031 exchange and an Opportunity Zone investment. We’ve added a table below comparing various aspects:
Comparison of Tax Deferred Real Estate Investment Structures
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| Comparison | 1031 Exchange | Opportunity Zone |
| Use of Property | Must be like-kind | Does not need to be like-kind |
| Nature of Property | Must be real estate | Can be real estate, business property or operating business. |
| Identification of Reinvestment | 45 days | 180 days |
| Closing on Reinvestment | 180 days | 180 days |
| Proceeds to invest | Entire proceeds from sale | Only the gain on the sale |
| Partnership Interests | Not allowed | Allowed |
| Stock in Corporations | Not allowed | Allowed |
| Recognition of Deferred Gain | Upon sale of replacement property unless further deferred to new like-kind property | “Recognition Date”- earlier of sale of investment in QO Fund, or December 31, 2026 |
| Tax Basis Step-Up | None | 10% if 5-year hold. 15% if 7-year hold. |