Opportunity Zones are one of the hottest topics in both the finance and real estate industries today, and for good reason. The tax advantages offered by investing in Qualified Opportunity Funds – like the Caliber Tax Advantaged Opportunity Fund, LP – make up what many believe to be the best capital gains tax reduction programs of a generation.
Created by the Tax Cuts and Jobs Act of 2017, opportunity zones are fairly new, and many investors are trying to determine how these new funds stand up against other tax deferred investment vehicles. Most often the opportunity funds are compared to the 1031 Exchange.
While similar in many ways, there are some very important distinctions to note between the two.
| Opportunity Zones | 1031 Exchange | |
|---|---|---|
| Overview | Created as part of the 2017 Tax Cuts and Jobs Act, Opportunity Zone Funds allow for a reduction in capital gains tax through investments in qualified areas and projects. | Under section 1031 of the Internal Revenue Code, a taxpayer may reinvest capital gains from the sale of one property into a new property to defer all capital gains taxes. |
| Timeline | Identification of reinvestment – no time requirement. Closing on reinvestment 180 days. | Identification of reinvestment – 45 days. Closing on reinvestment 180 days. |
| Property | Does not need to be like-kind. Can be real or personal property. Gain from any source: stocks, real estate, business sale, etc. | Must be like-kind. Must be real property. |
| Investment | Only the capital gain must be reinvested. | Entire proceeds from sale must be reinvested. |
| Partnership Interests | Allowed | Not Allowed |
| Corporate Stock | Allowed | Not Allowed |
To learn more about opportunity zones or how Caliber can help manage your investment and protect your capital gains, contact us today.