Our mission is to teach IRC section 1031 exchange concepts in a fun and easy-to-understand format, so that the student can save tax dollars on their real estate investments, and/or earn more money as a real estate professional.
Gary Gorman Author, Lecturer, Retired CPA The 1031 Exchange Experts, LLC 866-694-0204
1. The I.R.S. answer: technically, nothing! In the IRS regulations, a "qualified" intermediary is anyone who is not "disqualified." You are disqualified if you have acted as the employee, attorney, banker, broker, or real estate agent for an exchanger within the past two years, or if you are related to the exchanger. An entity (like a corporation) is disqualified if any disqualified person owns more than 10% of that entity.
Section 1031 of the IRC allows you to defer the capital gains tax upon the sale of qualified real estate and/or personal property used for business, but one of the requirements of doing an exchange is that the exchanger/investor must use a Qualified Intermediary or QI. So, how do you find a good QI...?
After a court case (91 AFTR 2d 2003-1850) there is an obvious criteria. Most QIs place their clients' money in a commingled, escrow-type account. This can be disastrous: if something goes
Recently, we encountered a great deal of confusion and consternation concerning a 1031 exchange, and the so-called "year-and-a-day" rule. You've probably heard that you should hold both your Old Property and your New Property for at least a year-and-a-day before and after a 1031 Exchange.
However (and this is a HUGE "however") THE YEAR-AND-A-DAY "RULE" IS NOT THE LAW. Nowhere in Section 1031, the regulations, tax court decisions, or any other official authority will you find any mention
Can I use proceeds from the sale of my Old Property for the earnest money deposit on my New Property?
Yes, but there's a trick to it. Here's how it's done:
First, make sure that the purchase contract for the replacement property has already been assigned to the intermediary. Next, make sure the escrow instructions state that should the contract be terminated, the earnest money will be returned to the intermediary and not to you. At your direction, the intermediary will forward the
I was under the impression that only Corporations and LLCs could be considered Disregarded Entities.
Answer – Only a one-person LLC can be considered a disregarded entity – a one person LLC does not file a tax return. It flows through to the individuals tax payer's ID
