Qualified Intermediary for 1031 Exchanges

1031 EXCHANGE HANDBOOK ...

QUALIFIED INTERMEDIARY

The most commonly used safe harbor in Section 1031 exchanges is the use of an Qualified Intermediary (QI).  The term Exchange Accommodator (EA) is also used in the industry to identify the function.  The EA cannot be someone with whom you have had a business or family relationship.  Thus, for example, your attorney, accountant or brother are all disqualified.  You must use an independent organization whose only contact with you is to serve as the EA.  The EA prepares the exchange documents, holds the cash proceeds from the sale and should answer any questions you may have during the exchange.  The EA must hold your proceeds from the sale of the property in order to have the transaction qualify as a 1031 exchange.  If you have actual or even constructive possession of the proceeds (i.e., control of the money without actual possession) this transaction is taxable to you.  If and when you determine that you want to undertake a 1031 exchange, you must involve the EA prior to the closing of the sale of your current property.

You should be aware that there is very little, if any, government control over the qualification of an EA.  It is important then that you be aware of the history, reputation and experience of the organization you choose to act as your Exchange Accommodator.  It is also important to be certain that this organization is insured and offers Qualified Escrow Accounts.  Olympic Exchange Accommodators, LLC meets all of these qualifications and more.