taxes

Who can help with a like-kind exchange?

George Saenzq_v2.gifDear Tax Talk,
I want to do a like-kind (1031) exchange of property and had hoped to use my attorney to do the deferred exchange. He tells me he can't, as it is against IRS rules to use your attorney. Why can't I use someone I trust to do the like-kind exchange? With all the scammers out there, I'm leery of trusting my property to someone I don't know.
-- Bob

a_v2.gifDear Bob,
Under the like-kind exchange rules you need a person (entity) to act as the accommodator of the 1031 exchange. That person will receive the proceeds from the property you relinquish in the exchange.

The accommodator will then use the proceeds to acquire the replacement property you identify and transfer the title to your name. Obviously, because that person will have control over your money, you'd like to be sure that the funds won't be diverted and that you end up with the replacement property.

The accommodator of the transaction is known in tax parlance as the qualified intermediary, or QI. The term "qualified" here is used to distinguish from "disqualified" and does not mean that the accommodator is licensed or regulated in any way by the Internal Revenue Service or state agency.

A disqualified intermediary would be your attorney, accountant, banker, real estate agent or relative. (The term QI also applies to certain withholding agents in international tax transactions, so an Internet search should indicate that you're looking for a Section 1031 QI.)

Because this is a largely unregulated industry, you need to know who you're getting in business with. Do your homework to find out about the QI. As the story, "Is your qualified intermediary a thief?" points out, not all QIs are honest.

Some of the things you should do include:

  1. Obtain references from your trusted sources.
  2. Obtain a banking reference.
  3. Verify if bonded or insured and obtain a certificate of coverage.
  4. Ensure that your signature is required for funds disbursements from a bank.
  5. Check professional affiliations.

Before you would trust a broker or a bank with your money you would do some homework, and you need to do the same with an accommodator.

Read more Tax Talk columns.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed, 0 point 4.19%  0.07 4.26%
15 year fixed, 0 point 3.23%  0.04 3.27%
5/1 ARM 3.34%  0.11 3.45%
 
View Rates in your area Next
Product Rate Change Last week
30K FICO-based HELOC 4.38%  0.01 4.39%
50K FICO-based HELOC 4.11% --0.00 4.11%
100K FICO-based HELOC 3.96% --0.00 3.96%
 
View Rates in your area Next
Product Rate Change Last week
60 month used car loan 2.63%  0.10 2.73%
48 month used car loan 2.90%  0.07 2.97%
60 month new car loan 3.16%  0.06 3.22%
 
View Rates in your area Next
Product Rate Change Last week
1 Year CD 0.90% --0.01 0.91%
2 Year CD 1.10%  0.02 1.08%
5 Year CD 1.74% --0.00 1.74%
 
View Rates in your area Next
Product Rate Change Last week
Balance Transfer Cards 15.66%  0.01 15.67%
Cash Back Cards 16.36% --0.00 16.36%
Low Interest Cards 10.87% --0.00 10.87%
 
Next
DAILY TAX TIP NEWSLETTER

Get expert advice during tax season on tax preparation and tips for cutting your tax bill.

advertisement

Connect with us