1031 is a section of the Internal Revenue code which specifically addresses the exchange of income producing property. There are several rules for 1031 exchanges (read more about like kind exchange rules). However, in this post, we will explore the concept that a qualified intermediary is a necessary component of the process.
What is a Qualified Intermediary?
A qualified intermediary could be a bank, but there are also companies that solely specialize in 1031 exchanges. It’s important to choose the right option because whoever you choose will be holding your money.
What Happens to My Money?
In a 1031 exchange, an intermediary puts your money into a bank account. The money draws interest, and whenever the trade is finished any interest or money left will be returned to you.
Can a Bank Be My Qualified Intermediary?
Banks can be qualified intermediaries. However, the issue with using a financial institution (rather than a company that specializes in 1031 exchanges) is that financial institutions are often focused only on holding and distributing the money. Qualified intermediaries that focus on exchanges can perform those functions, but they also know the 1031 exchange rules and can work with your tax advisor or your real estate agent to keep you in compliance. Qualified intermediaries can also assist in meeting reporting requirements.
Talk to a 1031 Expert
If you think you may qualify for a 1031 exchange, it’s time to call the experts at Baker Retirement and Wealth Management, P.C. We have been serving the greater Evansville area (Newburgh, Boonville, Jasper, Henderson, Owensboro, Mt. Vernon, and beyond) with guidance regarding tax laws, family farm tax strategy, small business accounting, and more for nearly thirty years.
Call Baker Retirement and Wealth Management today at 1-866-244-3517.1031 Exchange Consultation