| In a 1031 Exchange, the main services come
from a qualified intermediary (QI), also known by names like
facilitator or accommodator. The services are offered on
fee-for-service basis. The services from the QI include
paperwork, oversight, escrow services and making a bona-fide
exchange agreement under section 1031 of the Internal
Revenue Code. For Deferred Exchange treatment, the IRS and
the Treasury Department have very rigid requirements.
Therefore, to pass these requirements, the services from an
experienced professional are essential.
To get the services right, it is essential to ascertain
the credentials of the service provider before hiring. In a
1031 Exchange, physical possession or receipt of the money
resulting from sale of the property is not allowed, and
money is held by the QI only. Therefore, his credibility in
terms of bonding, background, reputation and financial
strength of are crucial.
The QI is supposed to put the exchange fees in a separate
account for the taxpayer, and not commingle that money with
any other exchange.
There are several private agencies that maintain a
database of qualified intermediaries across the United
States. They can be of use in selecting the right
intermediary with a good reputation, high level of bonding,
competitive fee schedule, financial strength, expertise and
integrity.
In the exchange process, the quality of the services is
marked by speed, accuracy and safety. A good QI will have
concern for the safety of the client’s funds. Through unique
exchange accounts he can ensure that the funds cannot be
deposited or withdrawn without signatures from both the
exchanger and the company. Many taxpayers had the bitter
experience of exchange funds misused by unscrupulous
intermediaries. Every aspect of the exchange has to be
managed according to the IRS rules and regulations.
The build-to-suit exchange is now becoming popular, where
the QI is a major player. Also called construction or
improvement exchange, this variant has the QI himself
acquiring fee ownership of the replacement property and
making improvements to it.
After the necessary improvements are done, within the
exchange period of 180 days, the ownership is then
transferred to the Exchanger.
This new variant of the exchange gives the investors a
high degree of flexibility and the opportunity to improve
upon an existing property or construct a new replacement
property itself. Thus, the range of services provided by the
QI and associates are unlimited from the word go.
1031 Exchange provides detailed information about 1031
exchange, 1031 exchange companies, 1031 exchange experts,
1031 exchange forms and more. 1031 Exchange is the sister
site of
Greater Orlando Real Estate.
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