WHY A QUALIFIED INTERMEDIARY?
In the regulations of 1991, many of the "grey areas were clarified in Section 1031 of the Internal Revenue Code, and established the Safe Harbor provisions. Safe Harbors include: 1) The use of a Qualified Intermediary; 2) Receipt of interest or Growth Factor by the Exchanger; 3) The use of a Qualified Escrow Account; and 4) The use of security instruments in an Exchange (such as the use of a Qualified Intermediary; qualified escrow/closing and trust accounts; third party guaranty). WHAT VERBIAGE IS NECESSARY TO CHANGE THE TRANSACTION FROM A NORMAL BUY/SELL TO AN EXCHANGE? The usual recommended procedure is to set out the Exchanger’s intent to perfect a 1031 Tax-Deferred Exchange in the purchase agreement (contract) between the Seller and Buyer. The following is an example of language that is currently satisfactory to establish the Exchanger’s intent: PHASE I (SALE): Buyer is aware that Seller is to perform a 1031 Tax-Deferred Exchange. Seller requests Buyer’s cooperation in such an
In the regulations of 1991, many of the “grey areas” were clarified in Section 1031 of the Internal Revenue Code, and established the Safe Harbor provisions. Safe Harbors include: 1) The use of a Qualified Intermediary; 2) Receipt of interest or “Growth Factor” by the Exchanger; 3) The use of a Qualified Escrow Account; and 4) The use of security instruments in an Exchange (such as the use of a Qualified Intermediary; qualified escrow/closing and trust accounts; third party guaranty).
