During the 1031 tax deferred exchange process, intermediary holds your funds until they are used for acquiring replacement property. You must make sure that the funds are held safely. It is essential to check that intermediary must be reputable and financially strong.
Some major roles of a QI include:
- Preparation of documents related to replacement property and relinquished property
- Coordination with the exchanger/seller and any adviser
- Holding the fund for the period of 45 days after selling the relinquished property
- Acquisition of replacement property in the name of QI and then conveying title to the exchanger/seller via deed
Section 1031 of IRS discreetly mentions that neither your children nor your siblings or parents can act as a middle person during the exchange process. You cant ask your broker, real estate agent, attorney, investment broker, or CPA to act as your QI. They can only serve as your intermediary if they have not represented you in last two years.
To check the credibility of you QI, you can follow various steps. If the intermediary is a licensed attorney, check with state bar association. You can do this by visiting the online directories. It is also a good idea to ask about special certifications like errors and omissions (E&O) certifications and fidelity bond. Ask your intermediary for references. If the QI is hesitating in giving the names, it is the time to search another one. You can also take our support to find a qualified intermediary that can facilitate the exchange.
We will also help you find replacement property to ensure you defer capital gains tax related to real estate transactions. Click here to know more.