By IRS ruling, the Qualified Intermediary must be a brick and mortar corporation that is in the full-time business of facilitating and managing 1031 Exchanges.
Though similar to the role of the escrow company, the qualified intermediary is more of a coordinator of the exchange process. They prepare the documentation for the properties being sold and purchased in the new transaction. They maintain and secure the funds in an FDIC insured bank account until the 1031 Exchange is completed and legal documentation is met.
The Intermediary also provides documents to transfer Replacement Property to the exchanger, and disburse exchange proceeds to escrow, and
holds the document of Identification of Replacement Properties sent by the Taxpayer. They then submit a full accounting of the Exchange Funds for the Taxpayers Records and a 1099 to the Taxpayer and the IRS for any growth proceeds paid.
Per Wickipedia here are further requirements for the Qualified Intermediary:
Anyone who is related to the taxpayer, or who has had a financial relationship with them within the two years prior to the close of escrow of the exchange can not be used as the QI. This means that the taxpayer cannot use their current attorney, certified public accountant or real estate agent. A corporation or other entity to act as Qualified Intermediary owned by your CPA, CPA firm, real estate agent or attorney is likewise disqualified.
A Qualified Intermediary should be bonded and insured against errors and omissions and employee dishonesty. Relevant educational background such as tax, law or finance is desired. Nevada is the only state that requires a QI to be licensed.
In order to take advantage of the qualified intermediary "safe harbor" there must be a written agreement between the taxpayer and intermediary expressly limiting the taxpayer's rights to receive, pledge, borrow or otherwise obtain the benefits of the money or property held by the intermediary. The intermediary can act with respect to the property as the agent of any party to the transaction and further, an intermediary is treated as entering into an agreement if the rights of a party to the agreement are assigned to the intermediary and all parties to the agreement are notified in writing of the assignment on or before the date of the relevant transfer of property. This provision allows a taxpayer to enter into an agreement for the transfer of the relinquished property (i.e., a contract of sale on the property) and thereafter to assign his rights in that agreement to the intermediary. Providing all parties to the agreement are notified in writing of the assignment on or before the date of the transfer of the relinquished property, the intermediary is treated as having entered into the agreement and, upon completion of the transfer, as having acquired and transferred the relinquished property.
WHO WE ARE
Douglas M. Clayton - Senior Vice President of Real Estate for Southwind Properties and President of ACC Investments, Inc., and President of Real Estate 1031 Exchange, LLC, which completes about two hundred 1031 exchanges per year. He was a principle in the formation of American Investment Exchange, LLC, which has dealt strictly in TIC acquisition. He has now formed Greystone Real Estate Group, LLC to handle small TIC real estate deals. He graduated from N.C. State University with a degree in Civil Engineering. Started with a Consulting Engineering Firm in development design and construction management. Started preparing construction inspections for three major financial inspections for them in 1977. Became the head of Construction Lending in 1980. In 1984 entered the commercial real estate industry and came with Southwind Properties in 1993 to head up the real estate department. Has been involved in the leasing, management, and sale of over $200 million dollars worth of real estate in the past twenty years.
David B. O’Connell – Founder and President of Myrtle Beach Real Estate Investment Groups LLC & Commercial Real Estate Investment Groups LLC., Senior Vice President of Ocean Developers LLC and Executive Vice President of 1031Commercial.Com LLC. Entering the real estate market 8 years ago with a background in the patent & marketing business, David quickly became #1 in sales & marketing for a $100,000,000 a year oceanfront real estate firm in South Carolina. After teaming up with ACC 6 years ago, he has been involved in several major real estate transactions, many major developments and hundreds of 1031 exchanges and is currently involved in the development, marketing and investment of over $350,000,000 worth of commercial real estate projects on the east coast. He has become a key player in matching investors and developers to create great real estate opportunities. He was recenlty credited with marketing over $190,000,000 worth of oceanfront condominium projects in the Myrtle Beach South Carolina in just under 6 months.
