1031 Exchange FAQs

Do I need a Qualified Intermediary?
Yes. If you do not set up a Qualified Intermediary(QI) prior to closing and take constructive receipt of the funds you will not be able to do a 1031 exchange. There is no turning back and you will have a taxable event.

• The Qualified Intermediary (QI) is a company that facilitates Section 1031 tax-deferred exchanges and is defined in Treasury Regulations. The QI enters into a written agreement with the taxpayer where QI transfers the relinquished property to the buyer and transfers the replacement property to the taxpayer pursuant to an exchange agreement. The QI holds the proceeds from the sale of the relinquished property in a trust or escrow account in order to ensure the taxpayer never has actual or constructive receipt of the sale proceeds, which would trigger capital gain consequences.
• The identification and replacement timelines should be monitored by the QI and the identification is done through the QI.

Do I need to tell my attorney that I am doing a 1031 Exchange?
Absolutely. They need to add that verbiage into the contract as well as coordinate with your Qualified Intermediary to make the exchange go smoothly.

Do I need to exchange the entire amount of proceeds sent to the Qualified Intermediary?
Yes, any funds that you don’t use to exchange with will be taxable

Same Taxpayer Rule -The buyer of a Replacement Property must be the same legal entity as the seller of the Relinquished Property.