The Qualified Intermediary is an integral part of completing a successful 1031 Exchange. Capital 1031 Exchange Company will coordinate with your tax advisors to navigate through the most current Internal Revenue Code rulings. In order to take advantage of the Qualified Intermediary “safe harbor” there must be a written agreement between the taxpayer and intermediary expressly relinquishing the taxpayer’s rights to receive, pledge, borrow or otherwise obtain the benefits of the money or property held by the intermediary.

A Qualified Intermediary is formally defined as a person who is not the taxpayer or a disqualified person, but someone who enters into a written agreement (the “Exchange Agreement”) with the taxpayer, and facilitates the exchange for the taxpayer.

A s a Qualified Intermediary, Capital 1031 Exchange Company performs several functions during the exchange. The Qualified Intermediary prepares necessary documentation for the exchange, including the Exchange Agreement. As required by the Exchange Agreement, the Qualified Intermediary acquires the relinquished property from the taxpayer, transfers the relinquished property, acquires the replacement property, and transfers the replacement property to the taxpayer.

The Qualified Intermediary does not have to actually receive and transfer title as long as the legal fiction is maintained.

If the taxpayer actually or constructively receives any of the proceeds from the sale of their relinquished property, those proceeds will be taxable as boot. Between the closing of the relinquished property and the closing of the replacement property (which can be as much as 180 days apart), Capital 1031 Exchange Company will hold the proceeds from the sale in a separate exchange account so that the taxpayer does not violate the rule against actual or constructive receipt of funds before they are reinvested in a replacement property.

Although the process is relatively simple, the rules are complicated and filled with pitfalls. Capital 1031 Exchange Company has developed an excellent reputation because of our unyielding commitment to our clients. Capital 1031 Exchange Company works closely with all parties involved in an exchange to ensure a smooth transaction.

Role of the Qualified Intermediary – Capital 1031 Exchange Company