If you need to conduct a 1031 exchange, it is critical that the qualified intermediary (QI) you choose have the highest levels of security and customer service in place.
While a 1031 exchange offers excellent tax deferral options for a real an investor, there are many rules that must be followed to ensure the IRS deems it a legal 1031 exchange. To ensure an exchange is legal, the investor can NOT take possession of the funds. Instead, the funds must be disbursed to a Qualified Intermediary (QI) and the investor must adhere to the rules and timelines pursuant to IRC Section 1031
A QI (also referred to as "accommodators" or "exchange facilitators") is the professional provider of the mandatory mechanics of an exchange. The use of a QI, as an independent party to facilitate a taxdeferred exchange, is a safe harbor established by the Treasury Regulations.
When the investor (or the "taxpayer" to the IRS) properly engages the services of a QI, pursuant to an exchange agreement, the IRS does not consider the taxpayer to be in receipt of the funds. Through an assignment of the Purchase & Sale Agreement, the QI actually sells the property to the buyer (even though title transfer directly from the investor to the buyer) and the sale proceeds go directly to the QI, who holds them until they are needed to acquire the replacement property. On the purchase of the replacement property, the QI purchases the replacement property and then delivers the funds directly to the closing agent who deeds the property directly to the taxpayer.
Without a QI, and pursuant to an exchange agreement, the IRS may not define a transaction as a delayed exchange, thereby making it ineligible for tax deferment status.
These regulations make the selection of a Qualified Intermediary a critical component of a 1031 exchange.
Asset Preservation, Inc. (API) is committed to providing its exchange customers with consummate service and the highest level of security available in the §1031 exchange industry. From the customer's first contact with an API representative, API's professional exchange counselors, attorneys and accountants work together to meet the customer's service needs in order to ensure a smooth transaction with no surprises. In the background, API management maintains tight financial controls and multi-layered security systems necessary to provide a level of comfort and the quality of performance relied on by sophisticated investors and Corporate America.
Established in 1990, API has successfully facilitated more than 140,000 tax deferred exchanges. Their Exchange Counselors, attorneys and accountants provide personal attention to each exchange, while their specialized Commercial Division handles complex exchange transactions where sophistication, speed and institutional flexibility are needed to get the job done.
According to Scott Saunders, senior vice president with API, "Most important to the selection of a QI, is the quality of security surrounding the funds we hold on behalf of investors."
"It is critical that written procedures are in place to govern who has access to the funds, and the appropriate levels of insurance and security," he states.
API maintains fidelity bond coverage, Errors & Omissions coverage and has implemented other protections for its customers that go beyond the typical protections offered by other qualified intermediaries. Another level of security to the taxpayer is their association with SISCO. API is a member of the Stewart Family of companies under the umbrella of Stewart Information Services Corporation (SISCO), an NYSE publicly traded company. Upon request, Stewart issues a Letter of Assurance (LOA) to each of API's exchange customers. Under the terms of this LOA, SISCO assures API's performance of its obligations under its Exchange Agreement. The coverage provided by the LOA is not limited to a specific dollar amount like a bond or Errors & Omissions coverage.
And finally, exchange funds are not commingled with API's Operating Accounts and their customers may request that API obtain their notarized signature for the movement of funds - an additional security feature.
API is a member in good standing of the Federation of Exchange Accommodators (FEA), the tax deferred exchange industry's only national trade organization. With a staff that is available for free consultation regarding all §1031 exchange matters, they also have a website that includes the ability to initiate a tax deferred exchange 24/7.
Saunders advises each taxpayer to ask detailed questions of their potential QI to ensure their funds are handled appropriately. "I feel confident that our firm has unmatched security and customer service in the industry. Call us and find out," Saunders says.
For more information on Asset Preservation, Inc., please visit http://apiexchange.com/ or call 800-282-1031