| 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.
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.
Article Source:
http://EzineArticles.com/?expert=Josh_Riverside |
