Who qualifies as an intermediary for a 1031 exchange?

Who qualifies as an intermediary for a 1031 exchange?

The Qualified Intermediary for your exchange. Under Section 1031 of the Internal Revenue Code (IRC), owners of business or investment properties, through the use of a Qualified Intermediary, can sell one property and purchase a similar or “like-kind” property while deferring capital gains.

Is a qualified intermediary required for a 1031 exchange?

Under treasury regulations, using a qualified intermediary is a requirement for deferring capital gains taxes through section 1031 exchanges. If there are any proceeds remaining after purchasing the replacement property, the qualified intermediary will return those funds to you.

Why do you need a qualified intermediary for a 1031 exchange?

A Qualified Intermediary plays a key role in the 1031 exchange process. Foremost among them is ensuring the exchanger remains in compliance with stringent IRS 1031 exchange guidelines to help ensure the exchange is not disqualified.

How do you choose a qualified intermediary?

When you’re interviewing qualified intermediaries, ask the average dollar amount for the exchanges they have performed in the last few years. Ideally, you should select a qualified intermediary with experience handling transactions around the same size as what you want to perform.

Can a bank act as a Qualified Intermediary in 1031?

In actual practice, banks cannot disregard these specific requirements of Section 1031 if they wish to function as a Qualified Intermediary: The funds must be held in a qualified escrow account or in a qualified trust. The escrow holder or trustee cannot be a disqualified person.

Can an attorney be a qualified intermediary?

In some jurisdictions, an attorney can be designated as your Qualified Intermediary, but it can’t be your regular legal counsel — IRS rules state that legal counsel can only act as a Qualified Intermediary if he or she has not performed services for the client in the prior two years unless the work is related to a …

How much does a qualified intermediary charge?

Institutional Qualified Intermediaries typically charge set-up and administrative fees that cover the sale of the relinquished property and the purchase of the first replacement property, which tend to range between $800 to $1,200 for the initial transaction.

Can a title company be a qualified intermediary?

A title company, because it is not considered a prohibited agent, can act as a Qualified Intermediary in a 1031 exchange in conjunction with its ability to serve as an escrow officer throughout the transaction.

What does a qualified intermediary charge?

How do you become a Qualified Intermediary 1031?

How do you become a Qualified Intermediary?

  1. Coordinate with the taxpayer on the structure of the 1031 exchange.
  2. Prepare and maintain relevant documents.
  3. Provide escrow instructions for all involved transactions.
  4. Create an arms-length transaction between the taxpayer and the buyer and sellers.

Who handles a 1031 exchange?

SIG brokers handled a 1031 exchange transaction for a client who needed an investment property to purchase in the Discount/Dollar Store niche. Working with SIG brokers is the best way to leverage top listings, lending, and marketing efforts. In this deal, SIG lead broker Todd Lewis and co-broker Elan Sieder were able to successfully complete a 1031 exchange deal for an investor client purchasing a Family Dollar NNN.

How much does a 1031 exchange cost?

For each 1031 Exchange transaction, the average Qualified Intermediary charges an administrative fee ranging from $750.00 to $1,000.00; additional 1031 Exchange transaction typically carry additional fees ranging from $200.00 to $400.00 each.

What is non qualified intermediary?

A nonqualified intermediary (NQI) is any intermediary that is a foreign person and that is not a qualified intermediary. The payees of a payment made to an NQI are the customers or account holders on whose behalf the NQI is acting.

What is a 1031 account?

A 1031 Exchange Account allows an owner of investment or commercial real estate to defer paying taxes on real estate gains, provided the property is exchanged for “Like Kind” property rather than sold for cash. “Like Kind” is all property classified as realty under state law.

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