A Qualified Intermediary (QI)—also known as an Exchange Accommodator or Facilitator—is an essential third party required to complete a valid 1031 tax-deferred exchange. IRS regulations stipulate that an investor cannot take actual or constructive receipt of sale proceeds during an exchange; doing so immediately triggers capital gains taxation on the entire transaction.
The QI serves as an independent party that enters into a written agreement with the taxpayer. Under this agreement, the QI takes assignment of the seller’s rights in the sale contract for the relinquished property, receives the net proceeds directly from escrow, holds those funds in secure accounts, and disburses them to close on the replacement property.
Not just anyone can act as your Qualified Intermediary. Treasury regulations strictly prohibit “disqualified persons” from serving in this role. Disqualified entities include family members, employee relationships, or professionals who have acted as your attorney, accountant, real estate agent, or investment banker within the two-year period prior to the transfer.
Beyond holding funds, a professional QI prepares all legal exchange documentation, tracks critical IRS timelines, handles property identification notices, and ensures full compliance with federal and state regulations. Their expert oversight protects your transaction from regulatory disqualification.
Selecting a reputable, institutional-grade Qualified Intermediary is vital. Look for facilitators that offer robust fidelity bond coverage, errors and omissions insurance, and segregate client funds into qualified escrow or trust accounts at top-tier banking institutions.
Protect your capital gains tax deferral with a trusted Qualified Intermediary.
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