How Tech Executives Can Use Opportunity Zones to Defer Taxes and Diversify Into Real Estate

Tech executives with concentrated stock positions face a familiar dilemma: when and how to diversify without triggering a significant tax event. Since the Opportunity Zone (OZ) program was introduced in the 2017 Tax Cuts and Jobs Act, it has quietly become one of the most powerful and perhaps somewhat underutilized tools that allows investors to defer and potentially eliminate capital gains tax while diversifying into real estate. 

Steve Stroud, Senior Wealth Manager for Three Bell Capital, who advises tech executives on their wealth management strategies, notes that with the S&P 500 more top-heavy in tech than ever before, the concentration risk many executives face is not just theoretical. It’s real. And it seems to be growing. 

Steve guides clients through what he calls a “destination portfolio” approach. “Think of building a portfolio like solving a puzzle. You don’t start with the middle — you start with the corners. These are the foundational pieces that provide structure and clarity. For many of our clients, especially those facing concentrated stock exposure, one of those corners is OZ investing,” says Steve. 

Here’s what he recommends for tech executives looking to diversify their portfolios: 

1. Know Your Exit Price
   Before any sale of a concentrated equity position, it’s crucial to determine whether now is a good time to exit. We use technical analysis, fundamental research, and historical trend studies to identify attractive entry and exit points.
   
2. Have a Destination Before You Sell
   Selling without a plan is the most common mistake we see. You may avoid risk by moving to cash, but you also risk missing continued upside, all while incurring a large tax bill. A smart investor exits when they have both an exit strategy and a destination strategy.
   
3. Use the Toolkit
   Three Bell Capital’s “Concentrated Position Toolkit” includes a variety of options: direct indexing, exchange funds, charitable structures, and of course, Opportunity Zone investing. But what makes OZs stand out is their ability to address two major pain points simultaneously:  taxes and diversification.
   
4. Look for Low-Hanging Tax Fruit
   It’s easy to overlook simple strategies in pursuit of complex ones. But OZs are, in many cases, low-hanging fruit. They offer immediate deferral of capital gains, potential for tax reduction, and even the elimination of taxes on future OZ investment appreciation if held for 10+ years.
   

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For tech executives with meaningful unrealized gains, Opportunity Zone investing may represent a rare alignment of timing, tax strategy, and portfolio construction. It’s not just about chasing returns; rather, it’s about reducing risk, reallocating with intention, and taking advantage of a program that was essentially built for those with concentrated stock gains. 

Steve concludes, “If you’re holding a concentrated stock position and wondering what’s next, now may be the time to take a closer look. Don’t wait for the rearview mirror to tell you what you should’ve done. Build your destination portfolio today, and let OZs be a cornerstone that offers both diversification and tax efficiency.” 

Contact us today to learn more about how you can diversify your portfolio with OZ investing and learn more about our BTR OZ Fund. Let’s connect! 

Past performance of Pinnacle Partners OZ Funds is not indicative of future results. There can be no assurance that the fund’s objectives will be achieved or that cash distributions will, in fact, be made or, if made, whether those distributions will be made when or in the amount anticipated or that certain tax benefits will be available to investors. An investment in the fund is illiquid, speculative, and will involve significant risks. It is only offered to suitable and qualified investors. Full details about the fund and its associated risks can be found in the fund offering documents. 

Nothing in this blog post should be construed as tax advice.  Please confer with your tax adviser to determine if an investment in an OZ fund is right for you.