The Role of a Qualified Intermediary

What is a Qualified Intermediary?

In 1991 the IRS established the requirement for a qualified intermediary (QI) in their regulation on Section 1031 of the Internal Revenue Code. The regulation, Section 1.1031(k)-1, provides the rules for a tax- deferred exchange.

The QI Plays an Important Role.

In addition to creating the required exchange and escrow account agreement, the QI provides or receives the other required documentation. This includes the assignment to the QI of the relinquished and replacement property contracts, providing notification of assignment to all parties, and receiving the 45-day identification notice. The QI also provides exchange settlement instructions to the settlement attorney/agent, delivers the escrow funds for settlement, provides a final accounting of escrow funds and interest earned, and provides instructions for reporting the exchange to the IRS. An important function of the QI is to track and follow up on the multiple exchange suspense dates to be certain the required documentation and action have been completed.


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