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FAQS » COMMON EXCHANGE TERMS

1031 FREQUENTLY ASKED QUESTIONS

Since 1991, Exchange Authority has been the Authority on IRC §1031 Exchanges.  Our exchange experts understand all the complexities and requirments that accompany every type of exchange and are willing to answer any question you may have.  To assist you with learning more about the 'ins and outs' of exchanges, we have compiled the questions we are most often asked.  To find answers to your questions either select a category or enter a search phrase.

If you do not find what you are looking for, contact us and we will respond promptly to assist you in your exchange, send you additional materials, or answer any question.

FAQs

Qualified Intermediary : « Search Again

What are the qualifications of an Exchange Intermediary?
Who may not be a "Qualified" Exchange Intermediary?
What are the duties of a "Qualified" Exchange Intermediary?

What are the qualifications of an Exchange Intermediary?

Answer:

The qualified exchange intermediary must not be a disqualified person.

The qualified exchange intermediary must not be a disqualified person as defined in Treasury Regulations Section 1.1031(k), must have a complete understanding of the current regulations, must have the ability to perform in compliance with the exchange agreement and must have a working knowledge of all of the ancillary problems and pitfalls of the exchange transaction.

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Who may not be a "Qualified" Exchange Intermediary?

Answer:

Any person, corporation or partnership.

Any person, corporation or partnership  who is an agent of or who is otherwise related to the taxpayer may not be a Qualified exchange intermediary.

The qualified intermediary is in the business of facilitating deferred exchanges by intermediating between the principals, and by acquiring the relinquished property from the taxpayer and transferring it to the purchaser and then acquiring the replacement property from a seller and transferring it to the taxpayer.

The qualified intermediary must protect the integrity of the form of the exchange agreement between the intermediary and the taxpayer and protect the taxpayer from actual or constructive receipt of money or other property prior to the transfer of replacement property.

A disqualified person is any person who acts as the taxpayers agent, employee, attorney or broker and any brother, sister, spouse, ancestor or lineal descendants. A disqualified person is also any corporation where 10% of the outstanding stock is owned by or for the taxpayer either directly or indirectly or any beneficiary of a trust where the taxpayer is the grantor.

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What are the duties of a "Qualified" Exchange Intermediary?

Answer:

A thorough familiarity an knowledge of the regulations.

The duties, responsibilities and challenges involved with operating a qualified intermediary business are in general a thorough familiarity and knowledge of the regulations, ability to provide documentation in compliance with the regulations, an understanding of all of the elements of the exchange and the knowledge and ability to perform in compliance with the exchange agreement and the regulations.

More specifically, the qualified exchange intermediary must

  1. Preserve the integrity of the exchange through preparation of proper documentation and completing the exchange in compliance with the regulations.
  2. Making sure the "Safe Harbors", if used, are not violated and therefore cease to apply.
  3. Interpreting and applying the regulations to complex transactional issues.
  4. Providing proper and accurate accounting to the taxpayer.
  5. Being able to respond to short time constraints which are prevalent in deferred exchanges.
  6. Managing the exchange funds in a prudent and safe manner which incorporates sound business practices.

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