A 1031 Exchange offers taxpayers a valuable opportunity to defer taxes on the sale of investment or business-use property. The first step in successfully completing an exchange is ensuring that it is set up with a Qualified Intermediary (QI) prior to closing.
It is safe to say that no two real estate transactions are the same. If you add something like a 1031 Exchange into the mix, it can easily get confusing as to who is ultimately responsible for ensuring the success of the exchange.
Here is a general list of the QI, Closing Agent and Taxpayer’s responsibilities in the exchange process:
Midland 1031 (QI) Responsibilities in 1031 Exchanges
- Preparation of the necessary exchange documentation for the Relinquished and Replacement Property(ies).
- Preparation of 1031 exchange closing instructions for each transaction.
- Coordination with the closing agent/attorney on behalf of the 1031 exchange.
- Escrow the exchange proceeds.
Closing Agent Responsibilities in 1031 Exchanges
- Provide QI with a copy of the deed, Schedule A, and fully executed contract for the transaction.
- Prepare the closing settlement statement to reflect the exchange pursuant to the QI’s instructions.
- Send the proceeds directly to the QI. No proceeds are to be disbursed to the taxpayer unless arranged prior to closing.
- Sign the Notice of Assignment of Contract provided by the QI and provide a copy to the buyer of the Relinquished Property or to the seller of the Replacement Property.
Client/Taxpayer Responsibilities in 1031 Exchanges
- Consult with a tax advisor regarding any questions about the potential tax liability on the real estate sale.
- Enlist the services of a QI prior to closing.
- Review and sign all documentation for the exchange prior to the completion of closing.
Often, sellers don’t realize that a 1031 exchange is an option and that they need a QI to facilitate the exchange. This is where the title agent can step in and become the hero for the client! Title agents realize that once a client closes on the property, the tax-saving 1031 exchange opportunity has been lost. The title agent also knows that a QI is required for this exchange and will go the extra mile to refer their clients to Midland. Midland makes the 1031 exchange process quick and easy. We offer personalized service, security, and expertise for each and every client.
For questions or more information regarding 1031 exchanges, contact Midland today by calling (239) 333-1031 or visit our website at www.midlandtrust.com.