Article Date:
December 2022

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Section 1031 Exchanges vs. Qualified Opportunity Zone Funds: Which Is Better?

Let’s say that Larry Landlord purchased a residential rental duplex 20 years ago for $100,000 and it’s now worth $1.1 million.


Larry wants out of this property, but he doesn’t want to pay $238,000 in tax on his $1 million capital gain.


One option is to defer the tax due on the gain by doing a Section 1031 exchange for another real property—for example, Larry could sell his duplex and use the proceeds to purchase a rental triplex of equal or greater value.


But there is another option: selling the property and investing the proceeds in a qualified opportunity zone fund. Which is better? Like most things in life, it depends. Specifically, it depends on Larry’s goals.


Goal: Get Out of the Real Estate Business


If Larry is tired of being a landlord and wants to get out of the real estate business, a Section 1031 exchange won’t help. You must exchange one property for one or more like-kind properties of equal or ... Log in to view full article.

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