Fortitude's Insights

Why Opportunity Zone Investments Will Not Replace Section 1031 Exchanges

Posted by Daniel Raupp on Jan 10, 2019 1:15:00 PM

About a month ago, one of our highly respected colleagues and a good friend of the Fortitude Investments Team Matthew Rappaport, Esq, LLM (an attorney in tax planning, structuring & compliance) shared a very informative article that we felt would be of value to our loyal blog subscribers. Mathew has helped us in numerous 1031 Exchanges and is a thought leader in the complexities of the American tax system.

In the following blog post, we shared a small excerpt from Matthew's original article on LinkedIn. In his article, Matthew explains the reasons why Opportunity Zone Investments Will Not Replace Section 1031 Exchanges. Here is a small portion of Mathew's original article on the Opportunity Program.

On November 18th, 2018, Matthew wrote:

As everybody probably knows by now, I've been part of the enthusiastic chorus of advisors singing the praises of the Opportunity Zone Program. Make no mistake: the program is a game-changer for private equity and the real estate industry. We've already seen widespread impact across the country in many markets where Opportunity Zones are located.

But some of the hype has led commentators to declare the end of the Section 1031 exchange. As the Opportunity Zone program takes shape, and as I conduct in-depth conversations with clients and advisors about taking advantage of the tax incentives, the way taxpayers will approach the program has become increasingly clear. My prediction based on these conversations is that Qualified Opportunity Funds will primarily be capitalized with proceeds of sales from non-real estate assets, such as stocks, bonds, alternatives (including REITs, which are not 1031-eligible), closely held businesses, artwork, and classic cars. For sellers of real estate, Section 1031 exchanges will still be the primary tax strategy.

According to Matthew's rationale why, here are some points to consider:

infograph-10-reasons-opportunity-zones-1031-exchanges

The material and views are those solely of the author, Matthew Rappaport, and does not necessarily represent the views of the presenting party, nor their affiliates. 

To read more of Matthew’s original blog article, click here.

If you have any questions about this subject or know of anyone considering a 1031 Tax-Deferred Exchange and needs a little guidance, please feel free to reach out to our team. We look forward to being of service to you!

 

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Written by Daniel Raupp

Under Daniel’s guidance since 2000, Fortitude Investment Group has guided clients into over $1 billion worth of securitized real estate investment offerings directly and indirectly, in both the DSTs for 1031 Exchanges and REITs. Daniel directs a range of strategic initiatives in the firm to successfully leverage core competencies in tax efficient investing, alternative investments, and operational excellence to create customer value.

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Topics: 1031 Exchange, Opportunity Zones

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of 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. There are risks associated with investing in real estate and Delaware Statutory Trust (DST) properties including, but not limited to, loss of entire investment principal, declining market values, tenant vacancies and illiquidity. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Insurance products offered through Concorde Insurance Agency, Inc. (CIA). Fortitude Investment Group is independent of CIS, CAM and CIA.

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