Based on your question, I assume you're selling an asset eligible for a 1031, but it's worth noting for others who may be interested in the question that one of the key distinctions between 1031s and an OZ investment is the wide breadth of capital gains -- short and long term from virtually any
source -- eligible for OZ deferral, compared to the much more limited world of eligible 1031 assets. Assuming a capital gain is eligible for both, I advise clients to consider the following primary factors in deciding between a 1031 and OZ investment: type/location of desired reinvestment. Though fewer asset sales qualify for a 1031, there are generally more options for a 1031 purchase than an OZ investment. Second is timing. I've seen too many investors get stuck in a bad deal because of 1031 money "burning a hole" in their pockets. The more generous timeline for reinvestment of gains in a QOF, along with the lack of a tracking/intermediary requirement, is a huge benefit. Third is liquidity needs, the ability to take a return on capital from an asset sale and reinvest just the capital gains in a QOF allows investors more flexibility to re-invest only partial-proceeds of a sale as compared to the treatment of "boot" in a 1031 exchange. Fourth is an individual's age/health. A 1031 may be a better choice for an individual closer to a step-up in basis at death. Fifth is anticipated appreciation. The tax-free sale after 10-plus years is the most important benefit for most of my OZ clients because they're primarily buying/developing property in distressed areas poised for a turnaround. Someone whose priority is asset stability and annual cashflow might not expect to see that same appreciation and so the value of that tax-free sale would be diminished.