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The Role of the Qualified Intermediary
The use of a Qualified Intermediary is essential to completing a successful IRC 1031 tax deferred exchange. Asset Preservation, Inc., as a professional Qualified Intermediary, performs several vital functions in an exchange.
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Fred Hanselmann
Rocky Mountain Photography ©
hanselmannphotography.com |
Creates the Exchange of Properties
The IRS stipulates that a reciprocal trade or actual exchange must take place in each exchange transaction. This means the Exchanger must assign to the Qualified Intermediary (1) their interest as seller of the relinquished property and (2) their interest as buyer of the replacement property. Because the Qualified Intermediary becomes an actual principal in the transaction, a reciprocal trade is created, even when there are three or more parties involved in the exchange (i.e. when the Exchanger is purchasing the replacement property from someone other than the buyer of their relinquished property).
Holds Exchange Proceeds
If the Exchanger actually or constructively receives any of the proceeds from the sale of their relinquished property, those proceeds will be taxable as boot. Asset Preservation, as the Qualified Intermediary, will hold the proceeds from the sale in a separate exchange account until the funds are used to purchase the Exchanger's replacement property. All exchange proceeds held by asset Preservation, inc. are covered by a written guarantee and $100 million in fidelity bond insurance coverage.
Prepares Legal Documentation
Several legal documents are necessary in order to properly complete an exchange. The Qualified Intermediary will prepare an Exchange Agreement, Assignment Agreements and Exchange Closing Instructions for each settlement officer handling the transaction.
Provides Quality Service
Although the process of completing an exchange is relatively simple, the rules are complicated and filled with potential pitfalls. Asset Preservation has developed a reputation as the industry leader due to our substantial exchange experience and our unyielding commitment to our clients. We work closely with all parties involved to ensure a smooth transaction.
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Jeffery James McClintock
Real Estate Advsior Broker |
RealEstateColorado.Net, Inc. is available to assist Exchangers and their advisors with their exchange strategies. The Exchanger is always advised to discuss the intended exchange with their legal or tax advisor. RealEstateColorado.Net, Inc or it's Brokers cannot provide advice regarding specific tax consequences. Investors considering an IRC 1031 tax deferred exchange should seek the counsel of their accountant and attorney to obtain professional and legal advice.
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