How Exchanges Work
In order for a Section 1031 exchange to be considered valid, a Qualified Intermediary must conduct the exchange, which includes the holding of the funds awaiting redeployment. Receipt by the taxpayer of any portion of the funds could lead to taxation of said funds, or worse: the entire exchange could fail.
What does a QI do?
- Consults with you on the rules and regulations surrounding Section 1031.
- Acts as a firewall between you and the funds by being escrow agent for both the incoming and outgoing monies.
- Prepares appropriate documentation to guide your relationship throughout the process.
- Provides you with a thorough End of Exchange report, detailing the particulars within the exchange.