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Beware of Unscrupulous 1031 Exchange Intermediaries!

By Ana Connell

Real Estate Agent with G & C Properties 01802303

May 30, 2007 08:50 AM

coins

A 1031 Exchange can be a very useful tool for the property owner who wants to defer capital gains on the sale of a real estate property.

Recently the Wall Street Journal and today Realtor Magazine had a great article about investors running into trouble with the IRS because of misappropriation of funds by the qualified intermediary or QI the investors used to manage the 1031 exchange funds!

If you know of any clients who utilize this tool, you may want to alert them to this situation! In the last year two QI's have misappropriated client funds and the IRS is looking at the investors as well as the QI's.

It is unclear, other than losing the tax deferral, if the investors will face any other penalties.

Your thoughts and comments are welcome!

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1~Judi Barrett

Idabel, OK

How should an investor select a qualified intermediary, criteria....etc.?

May 30, 2007 09:00 AM

Ana Connell

G & C Properties - Burbank, CA

Burbank Real Estate Agent

I would recommend that they talk to a qualified CPA/real estate attorney. Great question Judi!

May 30, 2007 09:04 AM

David Spencer

Keller Williams Northland - Kansas City, MO

Show Me real estate in Kansas City

This is why I always recommend 2 local Title companies as the intermediaries to choose from.

May 30, 2007 11:52 AM

Bill Exeter

Exeter 1031 Exchange Services, LLC - San Diego, CA

1031 Tax-Deferred Exchange Expert

It is important to know that the two gentlemen behind the two QI losses this year specifically got into the 1031 exchange QI industry in the last 2 years to use the money for their other business interests. They bought their way into the industry for "cheap money" as one of them put it.

In fact, one of the two actually changed the QI 1031 Exchange agreements to provide for them to borrow the clients' 1031 exchange funds for their own use and clients signed the agreements! It is so important for the client to read any agreements before they sign.

Here is a link to an article that I wrote on selecting a SAFE Qualified Intermediary: http://www.exeter1031.com/Selecting_SAFE_Qualified_Intermediary.aspx.

Nov 18, 2007 05:41 AM

Thank you William! I'll go check out your article!

Nov 18, 2007 12:50 PM

Beware of Unscrupulous 1031 Exchange Intermediaries!

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