What is a qualified intermediary?
The IRS says if you touch the money you pay the tax. However, if you use a qualified intermediary (or accommodator or facilitator) to transfer the money from the sold property into the purchased property, you qualify for a tax free exchange. The IRS does not permit your accountant, attorney, or escrow company to be your qualified intermediary.
The IRS says if you touch the money you pay the tax. However, if you use a qualified intermediary to transfer the money from the sold property into the purchased property, you qualify for a tax free exchange. The IRS does not permit your accountant, attorney, or escrow company to be your qualified intermediary.
A qualified intermediary is a person or entity which facilitates an exchange under the qualified intermediary safe harbor established by the regulations. The Q.I. performs several important exchange services: • the Q.I. takes assignment of the taxpayer’s interest in the relinquished property; • the Q.I. takes assignment of the taxpayer’s interest in the contract to acquire the replacement property, • the Q.I. holds (or makes arrangements for the holding of) the proceeds from the sale of the relinquished property. The taxpayer may not hold the proceeds, either directly or constructively through an agent) without causing the proceeds to be taxable as “boot.” • the Q.I. prepares the documentation necessary to complete the exchange. The documentation includes an exchange agreement, assignment agreements, closing instructions and related documents to permit each transaction to close as part of the exchange.
A Qualified Intermediary ensures the successful completion of the exchange by coordinating and documenting the transaction. By acting as Qualified Intermediary, Avenue Settlement Corporation provides the investor with the “Safe Harbor” protections against actual or constructive receipt of funds, as required by §1031. The fee for our services ranges from $750.00 to $2,500.00, depending upon the complexity of the transaction.
