It should open up some more investment. With fewer deferral options, QOZs will look more attractive as a deferral vehicle. Taxpayers who are heavily leveraged will have trouble taking advantage of the QOZ rules, however, because there is no boot-netting under the QOZ rules.
It will make OZ funds much more appealing in my opinion. Since there would no longer be an option to defer taxes through the long-standing 1031 exchanges, an investment in an OZ fund will be the only real option left to defer taxes and also to get partial forgiveness of original gain plus exclusion of appreciation on investments over 10 years. OZ Fund managers should have a much easier time attracting investors in general.
In my view, it will greatly increase the attractiveness of the opportunity zone tax program as it will be one of the few ways to defer capital gains tax.
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