Are you planning to reinvest your property for the tax deferment by using a 1031 exchange? Then worry not; our expert team that is “Qualified Intermediary for 1031 Exchange” is here at 1031sponsors.com to help you in each step of the process. Our expert team will help you in completing your 1031 exchange in the best way. So, before going for a 1031 exchange, you must have information about the 1031 Exchange and the roles of Qualified Intermediary.
What is a 1031 Exchange?
Section 1031 of the Internal Revenue Code (IRC) is a great rule for deferring capital gain taxes. Under the 1031 exchange process, the investors sell the property and reinvest the proceeds from the sale to buy a new property. This helps the investor deferring the capital gain taxes within 180 days of the sale of the property. The 1031 exchange QI, also known as the 1031 exchange accommodator, also known as a facilitator, is involved in the process. The money received after the sale of the relinquished property is kept in an escrow account, and if the investor touches the cash, they are disqualified from doing a 1031 exchange.
Requirements to serve as a Qualified Intermediary
It is necessary to involve a Qualified Intermediary for 1031 Exchange as, without his involvement, the investor cannot directly sell a property, purchase another, and defer capital gains taxes. IRS Section 1031 determines that neither your child nor your parents nor your sibling can be the middle person of your 1031 Exchange. It restricts anyone regarded as your “agent,” such as your attorney, broker, CPA, or real estate agent, from serving as your QI unless this person has not represented you within the past two years.
1031 Qualified Intermediary Role:
- Coordinate with the advisor or any seller on the structure of the 1031 exchange.
- Prepare documentation concerning the replacement property and relinquished assets.
- QI provides appropriate documents and instructions to the escrow or title organization concerning the exchange.
- An arm’s length transaction is created in the agreement between the exchanger or seller and the qualified intermediary.
- Transfer the property to the QI, who, at that point, passes the asset to the buyer.
- Take control of the assets from the sale of the relinquished property and deposit these funds into an insured and separate account.
- QI prevents the seller from taking constructive receipt of the assets from the sale.
- QI holds the funds received after the relinquished property sale during the identification period, i.e., 45 days.
- Receive and hold the written data about potential replacement properties.
- When the replacement asset has been selected, QI transfers funds for the purchase and disburses them to the title or escrow company for its purchase.
- Acquire the replacement property in the QI’s name and pass the title to the seller or exchanger by deed.
- Submit the complete accounting of the 1031 exchange for the seller’s records.
- Submit 1099 to the exchanger or seller and the IRS for any interest earned.