A Qualified Intermediary (QI) is a neutral third party who facilitates a 1031 exchange and helps ensure the transaction follows IRS requirements.
In a typical 1031 exchange, the QI holds the proceeds from the sale of the relinquished property and then uses those funds to acquire the replacement property. The taxpayer generally cannot take possession or control of the sale proceeds during the exchange without potentially creating a taxable event.
The QI also prepares and coordinates important exchange documentation, including the assignment of the purchase and sale agreements and the exchange agreement.
Choosing a qualified and experienced intermediary is an important part of the 1031 exchange process. A QI is not a tax attorney, CPA, or real estate agent, so investors should work with their legal and tax professionals to understand the tax implications of their specific transaction.
For Alabama commercial real estate investors, proper planning is especially important when selling one investment property and identifying a replacement property under the strict 1031 exchange timelines.
Dr. Nicole Jones of Jones Wadsworth Commercial Real Estate works with investors, property owners, and business clients throughout Alabama and can help coordinate the commercial real estate side of a 1031 exchange with the client’s qualified intermediary and professional advisors. if you would like to learn more, call 256-886-7700
