You’ve decided to sell your investment property, and you are pretty sure you want to do a 1031 Exchange. Now what? The first step before closing on the relinquished property during a 1031 Exchange is for the exchanger to retain a Qualified Intermediary (QI). It is important for the exchanger to do this before arriving at the closing table. The QI, otherwise known as an accommodator or facilitator, will be the person or entity that will take receipt of the exchange funds at closing.

The Federal Government has been very clear that the first way a tax-payer can ruin exchangeability is to take possession or receipt of the proceeds from the sale of investment property. The funds need to be sent to the QI upon sale. The QI will provide aid to the exchanger in the execution of the exchange, facilitate the process, hold the proceeds and prepare the documentation.

Critical to the success of a 1031 Exchange is obtaining the exact language that must be written into the purchase and sale contract on the relinquished property so the buyer knows the seller’s intentions, and the title or escrow company can prepare documents and checks or wiring instructions properly to deliver the funds to the QI.

There are thousands of QIs to choose from. One place to start is with The Federation of Exchange Accommodators (FEA). They are the only national trade association organized to represent professionals who conduct like-kind exchanges under Internal Revenue Code §1031. Visit them at www.1031.org for more information.

Please note: 1031RPS.com and its associated personnel are not tax professionals, and they recommend investors consult with their tax advisor to ensure their 1031 Exchange is within the IRS guidelines established.