A Qual­i­fied Inter­me­di­ary, or QI, plays a cen­tral role in most delayed Sec­tion 1031 exchanges.

The QI enters into a writ­ten exchange agree­ment with the tax­pay­er and facil­i­tates the trans­fer of the relin­quished prop­er­ty and acqui­si­tion of the replace­ment prop­er­ty. The agree­ment also restricts the tax­pay­er’s abil­i­ty to receive, pledge, bor­row, or oth­er­wise obtain the ben­e­fit of exchange funds dur­ing the exchange.

This struc­ture helps avoid actu­al or con­struc­tive receipt of the sale pro­ceeds. A tax­pay­er, cer­tain agents, and oth­er dis­qual­i­fied per­sons gen­er­al­ly can­not sim­ply serve as the QI.

When Should You Select the QI?

Before the relin­quished prop­er­ty clos­es.

An investor gen­er­al­ly should not receive the sale pro­ceeds per­son­al­ly and lat­er attempt to turn the trans­ac­tion into a tra­di­tion­al delayed 1031 exchange.

Questions to Ask a QI

• Expe­ri­ence with 1031 exchanges
• Secu­ri­ty of client funds
• Bank­ing arrange­ments
• Insur­ance cov­er­age
• Inter­nal con­trols
• Fees
• Doc­u­men­ta­tion and wiring pro­ce­dures

Key Point: Select­ing a Qual­i­fied Inter­me­di­ary should be part of pre-clos­ing plan­ning — not an after­thought.

Ref­er­ence Sources

• IRS Pub­li­ca­tion 544 — Sales and Oth­er Dis­po­si­tions of Assets

Impor­tant: This mate­r­i­al is for edu­ca­tion­al pur­pos­es only and is not tax, legal, account­ing, or invest­ment advice. Sec­tion 1031 out­comes depend on the tax­pay­er’s facts and com­pli­ance with applic­a­ble require­ments.