How to Change Qualified Intermediaries in a 1031 Exchange

Having a qualified intermediary by your side during the 1031 exchange process is essential to the success of your exchange. But not all intermediaries are created equal, and you may find that you don’t trust or get along with your intermediary once you’ve begun the process. If you find yourself in this situation, is it possible to switch intermediaries? In this article, we are going to talk about how to change qualified intermediaries in the midst of a 1031 exchange.

Swapping Intermediaries

If you have already begun the 1031 exchange process and transferred your exchange funds over to your intermediary, it’s probably best to stick with your intermediary until the 1031 process is complete. If you have not yet transferred your funds to the intermediary, it is much easier to switch intermediaries.

Do Your Due Diligence

While it is possible to change intermediaries midway through an exchange, doing so will cause a lot of headaches and potential delays. Make sure you do your due diligence and find an intermediary that you can trust well before you being the 1031 exchange process. The more prepared you are the more likely your exchange will succeed.

Qualified Intermediary Services

A 1031 exchange is a complex beast and requires the experienced hands of a qualified intermediary to ensure 100% tax deferral. At CPEC1031, our intermediaries have two decades of experience working with clients on their 1031 exchanges. We can answer all of your questions, advise you on property, and prepare your 1031 documents. Contact our intermediaries today to learn more about the services we provide and to get your 1031 exchange off the ground. Our main office is in downtown Minneapolis, but we work with clients throughout the United States.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

Can my CPA or Attorney Act as my Qualified Intermediary?

The treasury regulations envision the qualified intermediary as being a neutral third party in a 1031 exchange - someone who is not beholden to the tax payer. The taxpayer’s agents, employees, and relatives are all disqualified from being the qualified intermediary. In particular, anyone that’s been your agent or employee in the two years preceding the sale of the relinquished property cannot act as your QI.

So your attorney who has been your employee or your agent or your accountant is disqualified from being your qualified intermediary.

Choosing the Right Qualified Intermediary

Most qualified intermediary companies are separate independent companies that operate in this space exclusively. This is their bread and butter business and that’s what they do day in and day out. That’s who you want to use for your QI. Sometimes taxpayers will put a clause in their exchange agreement asking the qualified intermediary to make a representation that they are in fact a qualified party acting as the QI (i.e. they’re not the agent or employee of the taxpayer). This is not a bad idea, and is something you want to make sure that you address that with your QI.

When you’re choosing a qualified intermediary for your 1031 exchange, the caveat – buyer beware, is the name of the game. Properly vetting your qualified intermediary is one of the most important steps of a 1031 exchange. Not all qualified intermediaries have insurance, fidelity bonds, or other safeguards in place to protect your funds.

• Start Your Exchange: If you have questions about who can act as your qualified intermediary, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2016 Copyright Jeffrey R. Peterson All Rights Reserved