Qualified Intermediaries (QIs) play critical roles in facilitating 1031 exchanges of real property.
QIs are responsible for receiving and holding the net proceeds from a relinquished property during the 45-day period in which the taxpayer must identify replacement property to complete the exchange. He or she is identified on the HUD-1 settlement statement as the property seller. Should sales proceeds go directly to the taxpayer who owned the property prior to a sale, the transaction may not qualify for preferential tax treatment, and the taxpayer may be responsible for paying taxes on the gain in the year the sale occurred.
Once taxpayers identify 1031 replacement property, they may assign the purchase contract to the QI, who then acts as a buyer and transfers the proceeds from the relinquished property to the seller of the replacement property. The QI then transfers the replacement property to the taxpayer, who at no time receives or exchanges the benefit of proceeds from the initial sale.
Understanding the role of QIs in the exchange of like-kind property is crucial for taxpayers to receive the tax benefits of 1031 exchanges.
The team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email firstname.lastname@example.org.