How Can A Qualified Intermediary Help You Save Tax?
Direct swapping of investment properties is a complex process. For example, what if the seller denies handing over the property title on time? Or what if one of the exchanging parties doesn’t get what they want? To help investors complete 1031 exchange transactions smoothly, the IRS requires them to hire a licensed QI.
Qualified Intermediaries play a vital role in the successful completion of 1031 Exchanges. There is no way an investor can complete a 1031 exchange without involving a QI in the transaction. The roles and responsibilities of QIs in the exchange process are as follows:
- A Qualified Intermediary’s job starts from the first day of a 1031 exchange. The QI is responsible for closing the sale of the relinquished property.
- The QI (Qualified Intermediary) holds the proceeds of the relinquished property. Investors are not allowed to claim the proceeds, as doing so will eliminate the possibility of tax deferment.
- When the sale of the relinquished property is closed, a special document is signed, which recognizes the Qualified Intermediary as the ‘seller’ of the property.
- After the successful identification of the replacement property, the next job of a Qualified Intermediary is to have it within the next 180 days (begins from the date when the relinquished property is sold).
- On the closing day, the QI deposits the funds and receives the replacement property as the real estate purchaser.
- Once the 1031 exchange is closed, the QI, also known as a facilitator, transfers the property title to the investor.
Instead of looking at who is charging what, it would be better if you look at your QI’s experience and how many 1031 exchanges they have closed in the past. Here are a few factors that you can especially keep in consideration while selecting your 1031 exchange facilitator.
You can evaluate QIs based on the following factors –
- Services provided by them.
- Consultation fee.
- Types of 1031 Exchanges they deal in.
- Insurance and bonding costs (if any).
- Quality of customer support.
- Years of field experience.
These factors can help determine the credibility and experience of your 1031 QI. In case you haven’t prepared any list, one of our 1031 QIs can help you close your transaction.
How Can Qualifiedintermediary.com Help You Close Your 1031 Exchange?
To help investors make the most out of their like-kind exchanges, QualifiedIntermediary.com provides them one-to-one assistance throughout the investment period. Besides finding the right replacement property, our partner QIs have helped several investors defer capital gains tax by completing their 1031 transactions way before the exchange period deadline.