So if you're contemplating a 1031 Exchange, you should speak to your tax and legal advisors and should contact a qualified intermediary
as early on in the discussion as possible."
Because the qualified intermediary
receives and reviews the documentation that entitles our hypothetical French taxpayer to a low treaty withholding rate, the United States does not possess and cannot provide that documentation to France.
Under IRC [section] 1031 no gain or loss is recognized when a taxpayer directly, or indirectly through a qualified intermediary
, exchanges property used in a trade or business solely for like-kind property that is also used in a trade or business.
This arrangement will be treated as a like-kind exchange if the intermediary is a "qualified intermediary
(55) and the taxpayer is not in constructive receipt of the proceeds on the sale of the relinquished property.
The Qualified Intermediary
(QI) must have the technical knowledge to identify potential problems, meet regulatory requirements, provide proper advice and guidance, and most importantly, safeguard the exchange funds during the transaction.
The Internal Revenue Service (IRS) established the Qualified Intermediary
(QI) program to improve tax withholding and reporting on such income.
When the Exchanger sells the identified relinquished property, the cash proceeds of the sale go through a qualified intermediary
who uses the proceeds to acquire the replacement property from the EAT.
One solution to this problem is using a qualified intermediary
to complete the exchange.
taxation rules known as "qualified intermediary
," make our region quite a complex one.
Once your client is ready to sell his or her property, the money goes directly into a trust held by a third party called Qualified Intermediary
. The client then finds a property of equal or greater value and the third party transfers the trust money into the new property.
Thus, if the taxpayer enters into an exchange agreement before the closing, as required when engaging in a 1031 exchange, and thereafter deposits the earnest money funds with the qualified intermediary
(QI) or the closing agent before the closing occurs, the receipt of the deposit should not be treated as the receipt of sale proceeds.
Under IRC Section 1031, a taxpayer may defer the gain on the sale of certain investment property if the taxpayer utilizes the services of a Qualified Intermediary