1031 QUALIFIED INTERMEDIARY FOR YOUR 1031 EXCHANGE TRANSACTIONS

2007-05-02 10:04:19

( Business )



Real estate investors who want to defer payment of capital gains tax can avail of the benefits of 1031 Exchange where they avail tax deferral benefits from using the sale of their real estate for the purchase of like kind real estate properties. The Internal Revenue Code has a section on 1031 Exchange outlining the provisions and rulings in availing 1031 Exchanges.

The services of 1031 qualified intermediary are necessary to help real estate investors go through the process of 1031 exchange. There are no regulations requiring for licensing of 1031 qualified intermediary. Thus, it is crucial that real estate investors choose 1031 qualified intermediary based on experience and credentials. They should asses carefully these two credentials and verify it within the industry and from previous clients.

Qualified intermediary can either be an individual professional, a group of professionals or a company. They must be bale to facilitate 1031 exchange transactions. Their role is to receive and hold the funds from the sale of real estate property of an investor. They hold these funds until the investor will need it to pay off a real estate purchase that is a like kind property from the one previously sold. Thus, the proceeds of the sale remain with the qualified intermediary until the real estate investor needs to pay for the purchase of another like kind property. The process ensures that the investor does not earn profit from the sale and use it to finance other investments while deferring tax payments from the sale of the property.

The 1031 qualified intermediary also handles the documentation required to qualify real estate investors to avail 1031 exchange provision under the Internal Revenue Code. Exchange agreement, assignment of sale and 1031 exchange notice are three documentations prepared by qualified intermediary and submit it to the IRS as supplementary documents for 1031 exchange applications.

The role of 1031 qualified intermediary is crucial. Real estate investors must make sure that the qualified intermediary they select are bonded, professional, guarantees their exchanges and protected by regular audit. These factors show how organized and professional the 1031 qualified intermediary is.


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