Section 1031 Qualified Intermediaries in the New Economy

摘要

Recent events and the new economy promise to alter the manner in which Section 1031 qualified intermediaries function and the expectations property owners have for qualified intermediaries. Section 1031 allows property owners to exchange property tax free. Rarely do property owners swap properties, so to qualify for Section 1031 tax-free treatment they generally use a qualified intermediary structure to avoid prohibited constructive receipt of exchange funds. The qualified intermediary structure interposes the qualified intermediary into the exchange as an exchange facilitator. An exchanger in effect transfers relinquished property to the qualified intermediary. In exchange, the qualified intermediary agrees to acquire replacement property for the exchanger (in the case of a deferred exchange). The qualified intermediary transfers the relinquished property to the buyer and takes possession of the exchange funds.