Qualified Intermediary (QI)
A Qualified Intermediary is an independent third party who holds 1031 exchange proceeds between the sale of the relinquished property and the purchase of the replacement property, so the taxpayer never takes constructive receipt of the funds.
What it means
The QI (also called an exchange accommodator or exchange facilitator) is central to the 1991 safe harbor that makes modern 1031 exchanges practical. The taxpayer cannot receive, control, or benefit from the proceeds during the exchange; if they do, the exchange fails. The QI holds funds in a segregated exchange account, uses them to acquire the replacement property on the taxpayer's direction, and conveys title to the taxpayer.
The QI must be unrelated to the taxpayer. The IRS defines "disqualified persons" to include agents of the taxpayer within the last two years — their attorney, CPA, real estate broker, or employee cannot serve as QI on this exchange.
QIs are not federally licensed. Due diligence matters: ask about segregated accounts, bonding, errors-and-omissions insurance, and the firm's financial stability.
Example
An exchanger engages a national QI before closing the downleg. The title company wires sale proceeds to the QI's exchange account. Thirty days later, the QI wires those funds to close the upleg. The taxpayer never touches the money.
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