• Justin Swift

A Guide To Understanding Everyone's Role In 1031 Exchanges

A 1031 Exchange allows taxpayers to defer taxes when selling investment property. The first step in completing an exchange is establishing a Qualified Intermediary (QI). You must do this before closing. It is essential to know the steps and responsibilities in completing 1031 exchanges.


It is safe to say that no two real estate transactions are the same. If you add a 1031 Exchange into the mix, it can get confusing. Below, we discuss who is responsible for ensuring the exchange’s success.

Here is a list of the QI, Closing Agent, and Taxpayer’s responsibilities in the exchange process:




(QI) RESPONSIBILITIES IN 1031 EXCHANGES

  • Prepares the necessary exchange documentation for the relinquished and replacement property.

  • Prepares 1031 exchange closing instructions for each transaction.

  • Coordinates with the closing agent/attorney on behalf of the 1031 exchange.

  • Escrows the exchange proceeds.


CLOSING AGENT RESPONSIBILITIES

  • Provides the QI with a copy of the deed, Schedule A, and executed contract.

  • Prepares the closing settlement statement to reflect the QI’s instructions.

  • Sends the proceeds to the QI. Proceeds are not disbursed to the taxpayer unless arranged before closing.

  • Signs the Notice of Assignment of Contract provided by the QI. Provides a copy of the contract to the buyer of the relinquished property. Or, provides a copy to the seller of the replacement property.

CLIENT/TAXPAYER RESPONSIBILITIES

  • Consults with a tax advisor, discussing the potential real estate sale tax liability.

  • Enlists the services of a QI before closing.

  • Reviews and signs all documentation for the exchange before the completion of closing.

Often, sellers don’t realize that a 1031 exchange is an option and need a QI to facilitate the exchange. The title agent can step in and become the hero for the client! Title agents realize that once a client closes on the property, they missed the tax-saving 1031 exchange opportunity. The title agent also knows that a QI is required for this exchange.



For additional and more detailed information about 1031 exchanges, call

Granite Exchange today at 800-899-6959.

Our Certified Exchange Specialists® (CES®) can explain the process and guide you through every step of the exchange to ensure that the exchange is done properly.




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