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The Exchange Experts
39

What makes a Qualified Intermediary 'Qualified'?

This is a trick question, with two answers.

1. The I.R.S. answer: technically, nothing! In the IRS regulations, a "qualified" intermediary is anyone who is not "disqualified." You are disqualified if you have acted as the employee, attorney, banker, broker, or real estate agent for an exchanger within the past two years, or if you are related to the exchanger. An entity (like a corporation) is disqualified if any disqualified person owns more than 10% of that entity.

2. The Experts' answer: In the general sense, you should insist that your Qualified Intermediary actually have some qualifications! Since the IRS sets no standards, it is up to you to choose a Q.I. with expertise, integrity, and experience. Here are some criteria you can use to select a truly QUALIFIED intermediary:

• Will your exchange be handled by licensed professionals (like CPAs and attorneys)?
• Is your Q.I. available to you to answer your questions throughout the exchange, no matter how complex?
• Will your Q.I. defend your exchange if it is audited?
• Is the Q.I. bonded?
• How will the Q.I. hold your exchange funds? Will the Q.I. give you honest and direct access to view your account balance?

In short, anyone CAN be someone's QI, but not just anyone SHOULD be your QI.

--The Experts

 
 
Tee-Shots is Good information for coordinating with clients who desire 1031 transactions.

Luke Taylor
Prudential Village Realty
Punta Gorda, Florida

 
 

TEE-Shots are Tips from the Exchange Experts that are designed to make you think about, and ask questions about, the 1031 exchange process.