Are you aware of the fact that Qualified Intermediary (also known as 1031 Exchange Accommodator or 1031 Exchange Facilitator) is the most important part of a successful 1031 exchange process?
Qualified Intermediary is the independent body that is not the investor, an agent of the investor, or a related party to the investor that enters into the written agreement with the investor to complete the 1031 exchange on behalf of the investor. The exchange cannot be completed without the involvement of the QI.
The Qualified Intermediary does the main work that is to restrict the investor access to the sale proceeds after the sale of the relinquished property. The investor or the taxpayers are required to pay the taxes on any income received in any given year. But if the investor wants to defer the taxes on his income, the taxpayer must defer receipt of that income by avoiding both actual and the constructive receipt of that income. Here in this blog we will look upon the points we should look for
Five Things to Look For in Qualified Intermediary
Before you begin your 1031 exchange, firstly you should choose a Qualified Intermediary (QI). A good QI is the one who can make or break your exchange. To guarantee that everything goes easily it is essential to ensure that your Qualified Intermediary is actually qualified. Below mentioned are the four things that need to be looked in a QI.
- They should use a isolated, qualified escrow account (at no charge)
Make sure that the QI you choose does not have a amalgamate exchange account. It is important to ensure that your exchange account is not joint with another person’s funds. Your QI should have an isolated qualified escrow account so that only your money is in that account and it is recognizable for you.
- They must guarantee their exchange
Your Qualified Intermediary is responsible to do everything in their power to guarantee that your exchange is successful. A good QI is the one who assures you that your exchange will be carried out easily.
- Audit protection – offering support and documentation if needed (at no charge)
You should make sure that the QI you select keeps their records and documents neat and clean. Should an audit occur, you need to be sure that your QI has all the documentation you need.
- They must be easily accessible to respond to questions (at no charge)
You should avoid Qualified Intermediaries who have poor communication skills. You need your QI to be reachable and be prepared to answer any questions that you may ask.
- Experience-You need to look for a QI who has the experience, a reputation in the industry, and who has demonstrable results. You should not choose the Qualified Intermediary who does not have a history to back up their cases.
Choosing a good QI is one of the most essential steps to guarantee that your 1031 goes as it was planned. If you select the correct QI to guide you through the process, then it will help you to complete the rest of your exchange run smoothly.