This article provides useful, detailed information about 1031 Exchange Experts.
As far as the 1031 Exchange is concerned, it is the Qualified Intermediary who can be called the top \"expert\" who makes or breaks the deal. The role of the QI is crucial to completing the exchange successfully. It is he who acts as the \"glue\" that binds the buyer and seller of the property together in the 1031 Exchange process.
Selecting the right QI is most important, otherwise it will be like going to a quack rather than a qualified doctor for treating some serious disease. That means, a taxpayer intending 1031 must be cautious about falling victim to a poor facilitator with disastrous results, as he may not do an exchange at all or does not know how to structure it. And his deal will not pass the muster at IRS audit, leading to a loss of exchange funds due to poor investing or conscious deceit.
Care must be taken to ensure the credentials of a QI as a really experienced, knowledgeable professional who is clear in thought and communication, and transparent in dealings. As the exchange process requires quick decision-making, only a learned facilitator can help and clearly understand the situation and use the options rightly.
What makes a good or bad exchange QI is his level of depth in knowledge and resources. He must be well-versed with all tax code changes and latest rulings. Since the 1031 code has many gray areas, only an experienced facilitator can apply them to situations intelligently. To ensure safety for the money of the taxpayer, the QI ought to maintain a substantial fidelity bond for the benefit of their exchangers.
There are no licensing requirements for Intermediaries. No federal regulations for 1031 Exchange Experts are in place, and only two states have mandated licensing and bonding requirements for them.
To practice, they only need not to be stay qualified as defined by the Internal Revenue Code. Under certain circumstances, the Code prohibits certain \'agents\' of the taxpayer, such as accountants, attorneys and realtors who have served the taxpayer in their professional capacities within the last two years, from becoming a Qualified Intermediary for the taxpayer in an exchange.
Once in the job, a QI, who is not the taxpayer and not a disqualified person, takes up the assignment and enters into a written agreement called an Exchange Agreement with the taxpayer, acquires the relinquished property from the taxpayer, transfers the relinquished property, acquires the replacement property, and transfers the replacement property to the taxpayer. The whole process involves several time-consuming steps.
The written agreement between the taxpayer and intermediary arrogating the former\'s rights to buy and sell, and hold the money or property to the latter, is to take advantage of the qualified intermediary \"safe harbor\" provision enshrined in 1031.
Thus the main obligations of the this middle-man cum expert can be summed up as receiving the 45-day identification notice for replacement property and delivering escrow funds for replacement property settlement and arranging for direct deeding of the properties and ultimately providing the final accounting.
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