1031 MN

Who Can Act As The Qualified Intermediary For Your 1031 Exchange?

So you have finally decided that you want to sell an investment property and pick up another. You already know that there are taxes that are typically due within the tax year that you sell the property. But what if you would simply rather take that tax money and reinvest it into the same type or kind of investment property or something even better? Can you actually do that? Yes, with the 1031 you can but there are many laws and guidelines that will have to be strictly followed in order to make sure that it goes through okay.

The first thing you need to realize is that you might need a little help understand all of the rules and the timeframes that you will be looking at. You can hire a real estate attorney or simply ask the qualified intermediary to help. Since you have no choice but to hire a qualified intermediary, you might as well take full advantage of their services and see what all you can learn from them. You cannot complete a 1031 exchange without a 1031 exchange company so it is important to make sure that you are not forgetting about that step. But just what exactly does the qualified intermediary or the 1031 exchange companies do for you?

The intermediary is also referred to as a accommodator or a facilitator. This is a person, or in most cases a company, that acts as a neutral third party in the real estate transactions. This person or 1031 exchange company will enter into a written agreement with you regarding the exchange. They will acquire and then transfer the property that you are selling. Then they will acquire and then transfer to you the replacement property that you are taking on. It may seem overly complicated but it really is not. Once you get started with the process you will see how easily it all comes together.

The agreement will also explain that you are not in any way allowed access to the proceeds from the property you sell. Since you will not be paying taxes on those proceeds right now and they are to be used specifically for a replacement property, there really is no need having access to the money. The qualified intermediary holds onto the money for you. They are basically the “go-between” for your real estate investment transactions. They will hold onto the proceeds and use them when the time comes for the purchase of your new replacement property or properties.

You might also be interested to know that the fees for using a 1031 exchange company will vary. Typically though, you are looking at about five hundred dollars for the first time you use the qualified intermediary. In most cases, this fee amount will decrease each time you have to use them for the purpose of a section 1031 exchange.

It is also important to make sure that you are making sure that the right wording is contained within you contract with the 1031 exchange companies that you use. If you are worried about this part, you might want to have an experienced real estate attorney take a look at the contract to make sure that everything reads how it should. You just never know when something is going to come up so you want to make sure that you are being proactive and preventing problems from even taking place.

Once you have found the 1031 exchange company that you are going to use, it is important to make sure that you are researching the various rules and guidelines yourself. Even if you have a real estate attorney and an exchange company helping you out, you are responsible for making sure that you are staying within the guidelines set forth by the IRS and that you are getting all of the tax advantages that you should be getting.

The most important thing to pay attention to is the time frames given for the 1031 exchange. For example, you only have forty five days from the date you sell your property to submit, in writing to the qualified intermediary, the information on the replacement property or properties that you are looking to purchase. This forty five day mark is exact and there are no exceptions to the rule. Then you only have a total of one hundred and eighty days from the sale of your property to completely purchase and complete the transaction of the new property or properties that you are taking on.

As you can easily se, one slip up or one overlooked thing can cause you to miss out on the advantages of the 1031 exchange. So make sure that you are reviewing the website of the IRS, consulting with a real estate tax attorney selecting a qualified 1031 exchange company. By taking all of the right steps you will find that you are able to grow your real estate wealth quicker than you ever thought you could before. Why pay on those taxes now when you can get them deferred and use that money more wisely, such as investing in bigger and better real estate?