1031 Tax Exchange Details

1031 Exchange specifics

Proper legal implementation of a 1031 tax exchange is a job for an experienced and highly qualified intermediary (QI), who acts as your facilitator or accommodator. A QI is the person or entity that acts as the middleman in the exchange, providing the paperwork, IRC Section 1031oversight, escrow services and expertise necessary to assure that the exchange qualifies as an exchange under Section 1031 of the Internal Revenue Code. The QI also must be in receipt of the proceeds of the sale and "safe harbor" them until such time as the QI purchases the replacement property(ies) on behalf of the client, under Assignment from the client, and then immediately turns the real property back over to the client. In this manner the client is in full compliance with the IRS code in not having constructive receipt of the sale proceeds during the exchange, therefore maintaining the tax free status of the transaction, per the code.

The IRS requires that intermediaries remain an independent third party from the seller or buyer of the property. The IRS defines a disqualified party as an individual who in the previous two years has served as the exchanger's employee, attorney, accountant, investment broker, real estate agent/broker or is a relative.

Although a 1031 tax exchange is a very complicated process, an exchange using a good QI can become a simple process and look surprisingly like a standard sale.

Please email us to receive a 24-page pamphlet entitled "Section 1031Tax Deferred Exchanges in a Nutshell”, or continue exploring our site.

For more information, please email us at info@realtynetadvisors.com or call us at 800-872-1031.