When is a Qualified Intermediary disqualified from facilitating a 1031 Exchange
Did you know that in some situations, a person cannot act as a Qualified Intermediary (QI) for your transaction?
Let us first understand that anyone that is NOT disqualified is qualified. But, per the regulations,
“… a person who has acted as the taxpayer’s employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the 2-year period ending on the date of the transfer of the first of the relinquished properties is treated as an agent of the taxpayer at the time of the transaction.”
If any of these types of professionals provided their services (other than acting as a QI) within the 2 years of the sale of the relinquished property, that person (or entity) is disqualified.
There are some exceptions to this rule. There is no disqualification for the following:
Persons who rendered services for the Taxpayer solely with respect to § 1031 exchanges; or
The providing of routine financial, title insurance, escrow, or trust services for the Taxpayer by a financial institution, title insurance company, or escrow company. This definition was recently expanded to include bank affiliates. T.D. 8982.
Since Security 1st Exchange acts solely as a Qualified Intermediary, we can facilitate any of your 1031 Exchange transactions throughout the United States without being considered disqualified (as defined in the first bullet point above), even if you did a prior exchange with us within the 2 year period.
For more information, please reach out to your tax professional for specific questions or contact the specialists here at Security 1st Exchange for assistance.
References
Reg. Section 1.1031(k)-1(k)