Qualified Intermediaries in Florida: What You Need to Know

If you want to defer capital gains taxes on the sale of real estate through a 1031 exchange in Florida, choosing a qualified intermediary (QI) to handle the transaction is crucial to its success. The IRS sets strict guidelines about how the 1031 exchange must be executed. Choosing the right advisor to guide you though the process is a must. You will want to find a QI that understands IRS rules and has a sound track record of success. Read on to learn more about the role of a qualified intermediary, who you can select, and where they can be located. 

What is a Qualified Intermediary During a 1031 Exchange?

In general, a QI prepares all required legal documents to execute the 1031 transaction properly. Then, they will safeguard your funds after the sale of your asset. Finally, the qualified intermediary guarantees compliance with IRS standards and produces a proper accounting of the transaction. 

During the 1031 exchange, you cannot ever hold any of your profits. Selecting a trustworthy QI is vital to your success since you are entrusting them with what could be six figures or even millions of your hard-won proceeds. The qualified intermediary you select in Florida facilitates the entire transaction on your behalf. They will escrow the proceeds from the sale and then guide you through the purchase of your replacement asset.

Who Can be a 1031 Intermediary?

The short answer is – anyone. But that doesn’t mean you shouldn’t examine your choices carefully. It might be easier to discuss who cannot serve as your QI:

• Your family members, including your spouse. 
• Anyone you have had a financial relationship with in the past two years. 
• Someone that has served in an advisory capacity for you within the last two years. Examples are your lawyer, realtor, or accountant. 
• Your employees or the employees of any of your agents.
• The buyer or seller of your asset. 

The IRS describes these exclusions in sections § 267(b) and § 707(b) of the Internal Revenue Code. The bottom line is that your qualified intermediary must be someone you do not have a current relationship with or hold any influence over. 

Can I be my own Intermediary?

In Florida, during a 1031 exchange you must work with a qualified intermediary and cannot take on that role yourself. The IRS mandates the investor(you) may not control any aspect of the 1031 transaction. A QI can be an individual or a company but they must be neutral and previously unassociated with you. 

How Does a 1031 Exchange Work Between States?

If you are choosing to replace an asset with one purchased in Florida but you are not a resident, Federal IRS guidelines will allow it. Many out-of-state buyers will choose a Florida QI to gain expert knowledge of the rapidly changing real estate market. Also, working with a QI that understands Florida’s tax implications and withholding requirements can provide a large advantage.  

How Does a 1031 Exchange Work in Florida?

Florida is known for its business-friendly regulation environment. A 1031 exchange in Florida is especially appealing to out-of-state investors because the industry is unregulated. Specific 1031 Exchange Requirements in Florida include, but are not limited to:

• Properties exchanged must be like in kind. 
• Exchanged properties must be of equal or greater value.
• Taxpayer/Investor name must match on both sides of the transaction.

Don’t leave your 1031 transaction up to chance. Working with an experienced Florida qualified intermediary will help you choose a like-kind property and stay compliant. Resolute Property Management will guide you through a professional, trustworthy 1031 exchange that protects your interests.