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About Intermediaries
by James F. Little, MBA, CCIM, GRI

Can a 1031 exchange be completed without a "Qualified Intermediary?" Taxpayers may complete exchanges without the use of a Qualified Intermediary. A long history of adjudicated cases has upheld exchanges that have utilized buyers and sellers as accommodators. While I have completed exchanges without Qualified Intermediaries, I have met with resistance to the process from some parties and their attorneys. You'll be hard pressed to find an attorney who will advise a client to act as an "accommodator" in a 1031 exchange.

There are a host of reasons why exchanges through fourth-party Qualified Intermediaries are so popular today:

  • The mechanics of exchanges through Qualified Intermediaries are easy to complete since typical purchase and sale agreements with assignments to the Qualified Intermediary are used in conjunction with an exchange agreement between the Taxpayer and the Qualified Intermediary.

  • The purchaser of the Relinquished Property and the seller of the Replacement Property are not inconvenienced or asked to take any of the concomitant risks that Qualified Intermediaries are in the business to assume (Qualified Intermediaries do, of course, require Taxpayers to sign Indemnity and Hold Harmless agreements).

  • Qualified Intermediaries are a recognized "Safe Harbor," assuming compliance with regulations. Hence, the Taxpayer's risk of an adverse audit result is greatly reduced.

  • Taxpayers don't have to rely on naïve and unsophisticated buyers and sellers to accomplish their exchanges.

  • Since most Qualified Intermediaries are corporations, there is no risk to the Taxpayer that his/her/its exchange will "die in the crosswalk ..."

  • Most Qualified Intermediaries offer security mechanisms that safeguard the Taxpayer's funds during the exchange period.

  • The security and savings in time, energy and effort make a good Qualified Intermediary well worth the cost. 

For more information, see the Real Estate Inve$tment Analy$I$ and Exchange seminar offered by James F. Little that covers many aspects of 1031 exchanges, including multiple exchanges with and without Qualified Intermediaries.

This program also covers some of the income tax aspects of investment transactions, cash flow and yield analysis, comparative exchange analysis, and other aspects of investments and exchanges.

The program features a five-way exchange with step-by-step documentation, escrow instructions and closing statements. Finally, if you want to "run the numbers," the Power Analy$I$: Maximizing Inve$tment Return$ With Your Computer program will enable you to make light work of the daunting analytical aspects of income property analysis.

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