Qualified Intermediary? 1031 Exchange Necessity
Rules, rules, rules that we must live by when the Internal Revenue Service is involved such as having a Qualified Intermediary (QI) in
Qualified Intermediary should be Trusted
the 1031 exchange real estate process. As discussed in a prior post on 1031 Exchanges, in order to make this exchange legal and sanctioned by the IRS for capital gain purposes, this Qualified Intermediary must be involved.
We are talking about investment real estate property here and the selling of a property to purchase a ‘like kind’ property of equal or greater monetary value. This 1031 exchange process is all about deferring capital gain taxes and most like to do that deferrment until death. Make your heirs happy.
Yes, it will cost you more money to have a QI involved in your sell and buy but a necessary part of the deal. Swallow hard, it is part of the process to get it done.
A qualified intermediary is recognized by the IRS as a disinterested party in the sale and purchase in a 1031 exchange. The real estate broker, attorney, seller or buyer can not retain or hold the money from the sale of property…but a Qualified Intermediary can. QI are in every state and that can be the main business for them. They should be vetted like any other vendor. A good source of checking is your Department of Business Regulation as well as the Federation of Exchange Accommodators.
Qualified intermediaries must receive in writing the property or properties of real estate that the seller of the investment property is considering purchasing. This list may be audited by the IRS so make sure it is sound and complete with all address information. This is a process to start the 45 day window of opportunity for identification of these properties as well as the 180 day window to close by and this timeframe can not be extended.
At closing the monies for the sold investment property goes to the Qualified Intermediary and never touches the sellers hands. Ensuring you do your homework on this individual is important because no commingling of funds with other properties can occur. All detailed documents between the sale and the purchase of new properties are the responsibility of the QI and are important tax documents. Consult your CPA to ensure you are on the right path.
Now get going on your investment property growth in RI real estate or beyond and choose wisely! Looking for a RI real estate agent that knows her properties and can guide you with real estate choices? Call me, Ginny Lacey Gorman, at 401-529-7849 and let us discuss your preferences and real estate options. Yes a qualified intermediary is necessary in a 1031 Exchange.
~~~~~~~~~~~~~~~~~~~~~~~~
