The use of a Qualified Intermediary is essential to completing an IRC §1031 Tax Deferred Exchange. Investment Property Exchange Services, Inc., as a Qualified Intermediary, performs several vital functions in an exchange.

Acts as a Principal

The IRS stipulates that a reciprocal trade or actual exchange must take place in each IRC §1031transaction. This means the Exchanger must assign to a Qualified Intermediary (1) their interest as seller of the relinquished property and (2) their interest as buyer of the replacement property. By becoming an actual party to the exchange, a reciprocal trade takes place even when there are three or more parties involved in an exchange transaction (i.e. when the Exchanger is purchasing the replacement property from someone other than the buyer of their relinquished property).

Holds Exchange Proceeds

If the Exchanger actually or constructively receives any of the proceeds from the sale of their relinquished property, those proceeds will be taxable as boot. Investment Property Exchange Services, Inc. will hold the proceeds from the sale in a separate exchange account until the funds are used to purchase the replacement property. All exchange proceeds held by Investment Property Exchange Services, Inc. are covered by $50 million in fidelity bond insurance coverage and by a written guarantee of security from Fidelity National Title Insurance Company and Chicago Title Company (except in Oregon).

Prepares Legal Documentation

Several legal documents are necessary in order to properly complete an exchange. The Qualified Intermediary will prepare an Exchange Agreement, two Assignment Agreements and Exchange closing instructions for each closer.

Provides Quality Service

Although the process of an IRC §1031 exchange is relatively simple, the rules are complicated and filled with potential pitfalls. Investment Property Exchange Services, Inc. has developed a reputation as the industry leader because of our unyielding commitment to our clients. We work closely with all parties involved to ensure a smooth transaction.