In 2004, our firm established K & S General Exchange, LLC, to serve as Qualified Intermediary (QI) in 1031 tax deferred exchanges primarily involving real property. While we are precluded from acting as QI for any entity or individual our firm has represented in the last 24 months, we receive referrals for our services from accountants, financial institutions, and other attorneys throughout Central Kentucky.
In a 1031 tax-deferred exchange, a taxpayer sells investment property or property held for use in a trade or business, and the sales proceeds are held by a QI to avoid constructive or actual receipt by the seller. The seller then has 45 days from the closing on the relinquished property to identify replacement property and 180 days from the initial closing to close on the replacement property. The QI applies the initial sales proceeds towards the purchase of the replacement property, deferring capital gains on the initial sale for the taxpayer. The relationship between the taxpayer and the QI must be established before the initial closing.
We have also accommodated reverse exchanges – more complicated transactions, where replacement property is purchased first and relinquished property is sold later.
If you think a 1031 tax deferred exchange may be advantageous to you, your clients, or your customers, we welcome your inquiries.