An "Intermediary"
(also known as an "Accomodater" or a "Facilitator")
is required to act as a principal in your 1031 Exchange if you wish to keep the
"deferred status" on any gain from the sale of your property. You
the tax-
payer cannot receive ANY proceeds from the transaction - it is
held by the Intermediary in an exchange account! If you do receive
any proceeds, it is considered "Boot" by the I.R.S., and you
will have to pay
any appropriate taxes on it. "Boot" is the term used to
describe "un-like"
property received in an exchange. Examples of Boot are cash,
notes, personal
property, or any reduction in a mortgage (called "debt relief").
To avoid Boot,
you must trade across or up in Two (2)
areas - Equity and Mortgage (I'll
explain further later). Once you have control of any proceeds from the
sale or
exchange of your property, it is called Constructive Receipt. Please ask
your tax professional about participating in a 1031 exchange! |
Who
May Act As An "Intermediary"? |
The simplest way I
can answer this question is to mention who "CANNOT" act as
an Intermediary. With a few exceptions, they include, but are not limited to: a family
member, a controlled corporation, a partnership, a trust, your employee, attorney,
your accountant, your banker, and especially your REALTOR®. When it comes to
a 1031 exchange that only involves the sale of real estate, I highly recommend that
you employ a "Professional Intermediary" associated with a company that
"specializes"
in handling of 1031 Tax Deferred Exchanges. The fee is reasonable, all the paperwork
is done for you, your proceeds will be safer, and all rules and procedures to keep your
transaction "tax deferred" are adhered to. Your accountant or REALTOR® will be
more than happy to refer you to an Intermediary. |
*The state of
Nevada requires an Intermediary be "certified" as a "Registered
Accomodater". This includes making application with the Nevada Real Estate
Division, fingerprint submission, FBI background check, and a $25,000 bond.
Contact the Real Estate Division or Real Estate Board in your state to find out
about any laws that regulate Intermediaries. |
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