Do you have to use a qualified intermediary?
Unlike banks, stockbrokers, and insurance companies, there is no national standard or federal supervision of qualified intermediaries. In most states, QIs are not required to be licensed or bonded/insured, even though the IRS requires a qualified intermediary to hold your 1031 exchange funds! Why does this matter?
Who can act as a qualified intermediary?
A person who has acted as the taxpayer’s employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the two year period preceding the date of the transfer of the Relinquished Property by the Exchanger is treated as an agent of the Exchanger and is specifically disqualified from …
What is a qualified intermediary agreement?
A qualified intermediary (QI) is any foreign intermediary (or foreign branch of a U.S. intermediary) that has entered into a qualified intermediary withholding agreement with the IRS. In this situation, the QI is required to withhold the tax.
Can you do a like kind exchange without a Qualified Intermediary?
The Use of a Qualified Intermediary is Required That requirement eliminates the ability of an investor to complete a 1031 exchange without assistance. The qualified intermediary cannot be the investor and cannot work for, be related to, married to, or an agent of the investor.
How much does a qualified intermediary cost?
Generally speaking, institutional QIs will charge an initial transaction fee anywhere from $800 to $1,200. On top of that, the QI may charge between $200 to $400 for each additional property participating in the exchange.
Can I do a 1031 exchange by myself?
To facilitate the 1031 exchange, you will want to insert special language referencing the 1031 exchange in the Purchase & Sale Agreement for your relinquished property. You can do this yourself, if you decide to draft the agreement on your own.
What is a Qualified Intermediary (QI)?
A qualified intermediary (QI) must facilitate a 1031 exchange. The QI is a person who holds funds from the relinquished property and uses them to acquire the new replacement property.
When is the Qualified Intermediary involved in a 1031 exchange?
Something important to note here is that the Qualified Intermediary MUST be involved before the closing of the sale of your investment property. A 1031 Exchange starts with the sale of a piece of investment real estate and ends with the purchase of replacement property.
Can a real estate agent act as a Qualified Intermediary?
You have entrusted them with your greatest assets, so it makes sense that you would turn to them during the exchange process. However, CPAs, attorneys, investment bankers, and real estate agents/brokers fall under the ‘agent’ category, so they cannot act as your Qualified Intermediary.
What forms does the Qualified Intermediary file with the IRS?
The Qualified Intermediary will be responsible for filing many other forms with the IRS when executing the 1031 exchange, including a 1042, 1042-S, 1042-T, 1099, 945, and 1096. The QI-EIN must be used on all of these forms.