Myth #10: The terms 1031 Facilitator, 1031 Accommodator, and 1031 Qualified Intermediary refer to different roles in the transaction.
The Correct Answer: There are NO differences!!! I could, of course, have ended this discourse with one word—Nothing, but I won’t do that to you. They all mean the same thing. In fact, the governing organization for Qualified Intermediaries is called the Federation of Exchange Accommodators (FEA)–not the Federation of Qualified Intermediaries. Since most of the financial world knows us as Qualified Intermediaries, maybe our governing organization should change the name to the Federation of Qualified Intermediaries. I am on the Board of Directors of the FEA, and I might just suggest that.
So, then what is a Qualified Intermediary? In order to have a “safe harbor” transaction, a transaction that IRS recognizes as valid for a Section 1031 tax-deferred exchange, the taxpayer should use an independent Qualified Intermediary (QI). The QI’s role in the transaction is not that of a legal or tax advisor. The QI should remain completely independent. Their job is to prepare the necessary exchange documentation, not the closing documents, only the exchange documents. The QI receives the proceeds from the sale and then disburses the proceeds when the taxpayer closes on the purchase of the replacement property. By accomplishing those and other tasks, the QI is able to convert the taxpayer’s sale and purchase into a tax-deferred exchange. We (the QI) do a lot of work, for a small sum of money. But it’s a lot of fun, especially, since our clients are happy because at closing they don’t have to pay any taxes. Is this a good job or what!!
Myth #11: The Exchangor can get an extension to the 45-day rule on Identification or on the 180 day for final closing date due to complications on the transaction.
The Correct Answer: There are NO provisions to extend either the 45 day or the 180-day rules. The Exchangor has 45 days to identify what they might like to purchase as a Replacement Property and has 180 days to close on the Replacement Property. The Exchangor cannot extend either of those dates due to the 45th day or 180 days ending on a Saturday, Sunday a holiday. Affiliated 1031, LLC always suggests that the delivery of the Identification Statement or the final Replacement Property closing occur no later than the Friday before either of these important timelines expire. The only exception is when the President of the United States issues a Presidential Order extending these time deadlines. These Presidential Orders are normally given when there is a natural disaster, such as a hurricane or a major flood, etc.
Myth #12: The exchangor can only purchase the other person’s property.
The Correct Answer: When Tax-Deferred Exchanges first began, the taxpayer was forced to purchase the Replacement Property from the person he was selling his Relinquished Property to. That changed in the 1970s when Delayed exchanges were allowed. In a Delayed Exchange, the Exchangor generally sells its Relinquished Property to its buyer and then purchases its Replacement Property from a completely different third party.
Affiliated 1031, LLC always recommends that the taxpayer should consult their tax and/or legal counsel on all matters dealing with the Internal Revenue Service.
I personally look forward to working with you on your next Section 1031 exchange. To answer any of your questions or to open a Section 1031 transaction, please contact Stephen A. Wayner, Esq. CES at our toll-free telephone number: 877 – (USE) 873-1031 or at info@affiliated1031.com.
