A Guide To Everyone’s Role In a 1031 Exchange

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. This guide to everyone’s role in a 1031 exchange will help you learn more.

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.