What role does a qualified intermediary play in the process?
The like kind exchange rules permit the taxpayer to defer recognition of gain by contracting with a qualified intermediary to conduct sales of relinquished property and purchases of replacement property. Under their “Exchange Agreement”, upon the disposition of an asset, the qualified intermediary is required to sell all property that the taxpayer previously owned and depreciated. The qualified intermediary uses the proceeds from such a sale to purchase replacement property. Generally, the proceeds from the sale will not be enough to purchase the replacement property, so the taxpayer will fund a supplementary account that the qualified intermediary will use to make up the difference.
