Qualified Intermediary vs. Third-Party Administrator – What’s the Difference?

There are a lot of confusing terms in the realm of 1031 exchanges. Two you may hear quite often are “Qualified Intermediary” and “Third Party Administrator.” In this article, we are going to discuss the distinction between these two common 1031 exchange terms.

Qualified Intermediary

A qualified intermediary is a like-kind exchange expert who assists taxpayers through the 1031 exchange process. Here are a few essential items that a qualified intermediary can help you with during the 1031 exchange process:

• Document Preparation. There are numerous documents that need to be prepared in any 1031 exchange. Attention to detail is paramount on these documents as even a small error can jeopardize your exchange. Your intermediary can prepare all of these documents for you and make sure you’ve covered all your bases.

• Replacement Property Identification. You need to properly identify your replacement property during the 1031 exchange process and your intermediary can help you do that appropriately.

• Answering Questions. Any questions you have throughout the process can be answered by your intermediary.

Third-Party Administrator

A third-party administrator is basically just another term for a qualified intermediary. They mean essentially the same thing and can be used interchangeably. Whatever you call them – qualified intermediary or third-party administrator – it is important to work with one on your exchange.

Continued Real Estate Investment

With a 1031 exchange, you can defer your capital gains taxes on the sale of real estate and, ultimately, keep your hard-earned money working for you in a continued real estate investment. The first step is to work with a qualified intermediary who can walk you through the process, answer your questions, and advise you every step of the way. Contact our 1031 exchange intermediaries today to discuss the ins and outs of your exchange. Our office is located in downtown Minneapolis, but we work with clients across the country!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

What Does a “Third Party Administrator” do in a 1031 Exchange?

There are several parties involved in a typical 1031 exchange transaction. Today we’re going to take a closer look at one in particular – the third party administrator. In this article, we are going to discuss the role of the third party administrator in a 1031 exchange of real estate.

Third Party Administrator Defined

First thing’s first – what exactly is a third party administrator? Put simply, a third party administrator is a professional who specializes in facilitating 1031 exchange transactions. Essentially, a third party administrator is just another term for a qualified intermediary – a term you might be familiar with if you read our blog regularly. Here are a few benefits to hiring a third party administrator for your real estate exchange under IRC section 1031:

• Preparing Documents. There are a lot of documents you need to prepare during a typical 1031 exchange, and a third party administrator can take care of all of them so you don’t have to.

• Answering Questions. A lot of people who have never done an exchange before (and even some who have done many) have questions about their 1031 transaction. A third party administrator can answer all of your questions that arise during your exchange.

Real Estate Exchange Services

At CPEC1031, LLC, we provide real estate exchange services under section 1031 to clients in Minnesota and all over the country. A 1031 exchange is an excellent tax-deferral tool that allows you to avoid a big capital gains tax hit on the sale of real property as long as you move your net proceeds into a qualified replacement property. The added benefit is that you can keep your money working for you – compounding and building wealth over time. Contact our intermediaries today at our downtown Minneapolis office to speak in greater detail about your exchange.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

What is a Third-Party Administrator in a 1031 Exchange?

The treasury regulations have various safe harbors for 1031 exchanges. One of these is the qualified intermediary (or QI) safe harbor. The qualified intermediary acts as a neutral third party administrator unbeholden to the taxpayer to facilitate or administer The 1031 exchange.

What a Third-Party Administrator Does

The third-party administrator typically prepares the 1031 documents, provides instructions to the settlement agent, and most importantly holds the proceeds from the relinquished property so that the taxpayer or exchangor does not have any actual or constructive receipt of the net proceeds or 1031 funds.

Who Can be Your 1031 Third-Party Administrator?

The regulations in the Internal Revenue Code prohibit the administrator from being anyone that has in the last two years been an agent or employee of the taxpayer. So your attorney, your account, and your employees are all disqualified from acting as your administrator. Also, related parties such as your mother, or your son, or other relatives are excluded or prohibited from acting as your 1031 third-party administrator. The idea is that the qualified intermediary should be unbeholden, unrelated, and acting independently of the taxpayer or exchangor doing the exchange.

• Start Your 1031 Exchange: If you have questions about the role of the third-party administrator in a 1031 exchange, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved