Opportunity Zone Magazine Opportunity Zone Magazine Volume 1, Issue 1 | Page 57

1031 EXCHANGE VS. OPPORTUNITY ZONES
1031 Exchange
vs. Opportunity Zones:
How QOZs can help
1031 Exchange Clients
NT)
By Lance Growth
With the introduction of Opportunity Zones,
taxpayers have more options to better protect their capital and reinvest into the economy.
O
ne of the hardest conversations with clients might
be the disappointing fact that they can’t exchange
the value of their business.
For years, savvy investors have used a 1031 exchange to shield
themselves from burdensome capital gains tax. In the state of
California, investors save an average of 33 percent when they
utilize a 1031 exchange for the sale of an investment property
by deferring their capital gains tax.
A 1031 exchange is a section of the U.S. internal revenue code
that allows investors to defer capital gains tax on an exchange
of like-kind properties held for business or investment. Even
personal property was once exchangeable, however, due to the
passage of the 2017 Tax cuts and Jobs Act, 1031 exchanges are now
only applicable to real property. Though this minor change in
wording has led to a dramatic change in what kind of assets can be
exchangeable, the 2017 Tax Cuts and Job Act did however provide
some measure of relief for the limitation added to a 1031 exchange
through the introduction of Qualified Opportunity Zones.
OPPORTUNITYZONEMAGAZINE.COM
55