There is a lot of excitement about opportunity zones, but one potential game changer could be the possibility of timing a 1031 exchange transaction with an opportunity zone deal. If an investor could time the transaction correctly—a deal that would promise to be highly complex—it could create an option, albeit a long-term option, to transition out of real estate and avoid hefty capital gains taxes. However, the possibility is more fantasy than reality at the moment.
“It is still a new investment opportunity, and some of the legislation isn’t fully finalized,” Davin Carey, managing financial advisor at Carey & Hanna, tells GlobeSt.com. “We are still wrapping our heads around what some of the opportunities might be. I think that opportunity zones could be a significant boon for real estate investment, and if there is a way to successfully marry a 1031 exchange into an opportunity zone or an opportunity zone fund, there is an opportunity for that to be a significant boon to real estate transactions.”