Now that you’ve sold your land or ranch you have 45 days to exchange it for another like-kind property and select someone to facilitate the transaction. Choosing the right qualified intermediary (QI) can be challenging. It is crucial you find someone that is trustworthy and professional. You will be entrusting them fully with your sale proceeds and need them to supply you with a full and accurate accounting of the transaction. Your qualified intermediary is the key to IRS compliance during a 1031 exchange. Read on to learn more about the rules and who can serve in this role.
A Qualified Intermediary is Mandatory for a 1031 Land Exchange
Whether an individual facilitates your transaction or a company does, IRS section 1031 says you cannot do it yourself. Your QI is responsible for the following steps:
The overall goal of the relationship is to keep all land ownership and replacement out of your control. Doing so will meet IRS rules and allow capital gains deferment.
Certain People Cannot Serve as Your Qualified Intermediary
While anyone can theoretically assume the role of a QI, there are specific people in your life that you cannot choose. Simply put, if you have potential influence over someone – they cannot serve. Those people include, but are not limited to:
The IRS dictates disqualified QI’s as “any agent of the taxpayer at the time of the transaction.” Provisions go on to state the candidate is disqualified if the relationship was not concluded two years before the surrendered property’s closing date. Rules also state an attorney is disqualified if he or she has given you legal or tax advice within that same two-year timeframe.