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An increasing number of investors are exploring additional ways to make investments with tax benefits. Two such avenues are 1031 exchanges and opportunity zones. Both are gaining popularity, and both allow the investor to defer capital gains taxes, but like all investments they have their own lists of pros and cons.


What is a 1031 Exchange?

A 1031 tax-deferred exchange can be a powerful tool for investors to sell and buy property to defer capital gains tax. You can then reinvest your sale proceeds that would otherwise be paid to the government as capital gains taxes.


What is an Opportunity Zone?

An Opportunity Zone is a community development program established by congress in the Tax Cuts and Jobs Act of 2017 to encourage long-term investments in low-income urban and rural communities across the country. An Opportunity Zone is an economically distressed community where new investments may be eligible for preferential tax treatment. To be qualified Opportunity Zones are certified by the Secretary of the U.S. Treasury.

1031 Exchange versus Opportunity Zone Q&A

Do I have to purchase a like-kind property?

1031 Exchange: Yes, and it must be real, tangible property.

Opportunity Zone: Not required, but it must be unimproved land or property located in a designated Opportunity Zone.


How long to I have to find a replacement property?

1031 Exchange: The like-kind property must be identified within 45 days and closed within 180 days.

Opportunity Zone: You have six months to complete the deal.


How long can I defer capital gains?

1031 Exchange: They can be deferred until the property is sold unless you enter into another exchange. This can be done multiple times.

Opportunity Zone: You can defer taxes until December 31, 2026, or upon sale of property.


Do I have to improve the property?

1031 Exchange: No. You can do as little or as much as you’d like to it.

Opportunity Zone: Yes – a substantial improvement is required, keeping in mind the structure behind an opportunity zone is to help improve the community in which it is purchased.


Is there an income tax basis step up for holding the property for five or seven years?

1031 Exchange: No.

Opportunity Zone: If it is held for seven years before Dec 31, 2026, 15%.


Can I use partnership interest or stock to make a purchase?

1031 Exchange: No.

Opportunity Zone: Yes.


For more information about either of these investment opportunities, contact us for more detailed information. Visit our website for other types of exchanges that are set up as tax-deferring investment strategies including DSTs, UPREITS and more.

Diversified Investment Strategies represents a team of experienced and trusted professionals specializing in real estate investment and services – including buying, selling, leasing, retirement planning and wealth growth and management through strategic, informed investment choices and a meticulous real estate investment analysis. As knowledgeable replacement property professionals, they help clients build a customized strategy that identifies suitable investments pursuing successful completion of a 1031 Tax-Deferred Exchange. Visit them at or call 866-261-0104.

There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Past performance is not a guarantee of future results.  Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to sell any securities. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney.

Diversified 1031 does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.

Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Diversified 1031 is independent of CIS.