Botch a 1031 Exchange? Opportunity Zones May Provide a Backup Plan

Clients who wish to execute Section 1031 like-kind exchanges are often discouraged by the strict timelines. Replacement property must be identified within 45 days after the original property is sold, and that replacement property must be purchased within 180 days. Strict tracing rules apply, so that the proceeds of the first sale must be used to execute the second sale. Opportunity Zone investments must also be made within 180 ays after the sale of the original property, but there are no tracing rules. Taxpayers can use any funds to purchase the OZ investment (and the investor only must invest as much as the amount of gain they wish to defer). The benefits of an OZ investment are different, however, Taxpayers are currently only entitled to defer gain until December 31, 2026. There are proposals to extend this date, and the taxpayer will recognize no gain at all if the property is held for ten years. For more information on the rules governing opportunity zones, visit Tax Facts Online. : Q .