Category: QI Services

Qualified Intermediary Explained 
A Qualified Intermediary (QI) is an independent third party that facilitates Internal Revenue Code (IRC) Section 1031 tax-deferred exchanges. Prior to the issuance of the here. 
 
The material in this blog is presented for informational purposes only. The information presented is not investment, legal, tax or compliance advice. Accruit performs the duties of a Qualified Intermediary, and as such does not offer or sell investments or provide investment, legal, or tax advice. 

Qualified Intermediary Explained 
A Qualified Intermediary (QI) is an independent third party that facilitates Internal Revenue Code (IRC) Section 1031 tax-deferred exchanges. Prior to the issuance of the here. 
 
The material in this blog is presented for informational purposes only. The information presented is not investment, legal, tax or compliance advice. Accruit performs the duties of a Qualified Intermediary, and as such does not offer or sell investments or provide investment, legal, or tax advice. 

Qualified Intermediary Explained 
A Qualified Intermediary (QI) is an independent third party that facilitates Internal Revenue Code (IRC) Section 1031 tax-deferred exchanges. Prior to the issuance of the here. 
 
The material in this blog is presented for informational purposes only. The information presented is not investment, legal, tax or compliance advice. Accruit performs the duties of a Qualified Intermediary, and as such does not offer or sell investments or provide investment, legal, or tax advice. 

While local QIs offer proximity and knowledge of specific regulations, national QIs like Accruit provide broader expertise, resources, and risk management capabilities. National QIs understand regulations across the country, including state-specific mandates, such as those in Colorado and California.  
Local QI vs. National QI 
Generally, the most important aspect of picking a Qualified Intermediary to help an Exchanger carry out their 1031 Exchange is peace of mind, competency, and dependability. These attributes are not exclusive to local businesses, in fact they might be more commonly found with a national QI.  
When considering a QI for a 1031 Exchange, the decision shouldn’t be based on proximity, but rather several other factors that have a greater impact on the exchange, including the following:

Experience & Expertise 

Local: Knowledgeable of specific local regulations & transactions, smaller volume of cases, limited expertise in complex transactions

National: Knowledgeable of wide range of regulations & transactions across different states, larger volume of cases, greater expertise with complex transactions 

Resources to Scale 

Local: May be more limited on resources, work on a smaller scale with fewer cases, locally concentrated network

National: Typically, robust resources and efficient handling of large volume of cases, wider network of professionals 

Risk Mitigation 

Local: Might not be able to offer the same level of risk mitigation 

National: Likely to have strong insurance coverage and bonding in place, added safeguards for clients  

While both types of QIs have their benefits, national QIs tend to offer wider expertise, resources, and risk management capabilities. However, the decision ultimately depends on individual needs, transactional complexity, and personal preferences.  
State Regulations for QIs 
When selecting a Qualified Intermediary, there are many options to choose from, some local and some national. While the idea of a local QI may seem attractive, a nationally recognized QI could provide the Exchanger with a better experience and more robust knowledge of the rules & regulations of IRC Section 1031, including the most recent court cases.  
It’s important to remember there is no federal regulation of Qualified Intermediaries, however there are some state-level regulations in a handful of states that are meant to protect the Exchanger when facilitating an exchange with Relinquished Property within that state. We will focus on Colorado, Accruit’s headquarters, and California, a state with some of the most extensive requirements for Qualified Intermediaries.  
Colorado 
Requirements for Qualified Intermediaries conducting 1031 Exchanges vary from state-to-state. In 2009, Colorado’s legislature passed Senate Bill 1007, Chapter 708  which include: 

Identical fidelity bond and Errors & Omissions (E&O) policy. 

QIs must act as custodians and maintain strict management of client funds. 

The California Franchise Tax Board mandates QIs to withhold 31/3% of the sales price for the Exchanger if the exchange fails. 

For 1031 Exchanges involving out-of-state property, California enforces a “claw back”

While local QIs offer proximity and knowledge of specific regulations, national QIs like Accruit provide broader expertise, resources, and risk management capabilities. National QIs understand regulations across the country, including state-specific mandates, such as those in Colorado and California.  
Local QI vs. National QI 
Generally, the most important aspect of picking a Qualified Intermediary to help an Exchanger carry out their 1031 Exchange is peace of mind, competency, and dependability. These attributes are not exclusive to local businesses, in fact they might be more commonly found with a national QI.  
When considering a QI for a 1031 Exchange, the decision shouldn’t be based on proximity, but rather several other factors that have a greater impact on the exchange, including the following:

Experience & Expertise 

Local: Knowledgeable of specific local regulations & transactions, smaller volume of cases, limited expertise in complex transactions

National: Knowledgeable of wide range of regulations & transactions across different states, larger volume of cases, greater expertise with complex transactions 

Resources to Scale 

Local: May be more limited on resources, work on a smaller scale with fewer cases, locally concentrated network

National: Typically, robust resources and efficient handling of large volume of cases, wider network of professionals 

Risk Mitigation 

Local: Might not be able to offer the same level of risk mitigation 

National: Likely to have strong insurance coverage and bonding in place, added safeguards for clients  

While both types of QIs have their benefits, national QIs tend to offer wider expertise, resources, and risk management capabilities. However, the decision ultimately depends on individual needs, transactional complexity, and personal preferences.  
State Regulations for QIs 
When selecting a Qualified Intermediary, there are many options to choose from, some local and some national. While the idea of a local QI may seem attractive, a nationally recognized QI could provide the Exchanger with a better experience and more robust knowledge of the rules & regulations of IRC Section 1031, including the most recent court cases.  
It’s important to remember there is no federal regulation of Qualified Intermediaries, however there are some state-level regulations in a handful of states that are meant to protect the Exchanger when facilitating an exchange with Relinquished Property within that state. We will focus on Colorado, Accruit’s headquarters, and California, a state with some of the most extensive requirements for Qualified Intermediaries.  
Colorado 
Requirements for Qualified Intermediaries conducting 1031 Exchanges vary from state-to-state. In 2009, Colorado’s legislature passed Senate Bill 1007, Chapter 708  which include: 

Identical fidelity bond and Errors & Omissions (E&O) policy. 

QIs must act as custodians and maintain strict management of client funds. 

The California Franchise Tax Board mandates QIs to withhold 31/3% of the sales price for the Exchanger if the exchange fails. 

For 1031 Exchanges involving out-of-state property, California enforces a “claw back”

While local QIs offer proximity and knowledge of specific regulations, national QIs like Accruit provide broader expertise, resources, and risk management capabilities. National QIs understand regulations across the country, including state-specific mandates, such as those in Colorado and California.  
Local QI vs. National QI 
Generally, the most important aspect of picking a Qualified Intermediary to help an Exchanger carry out their 1031 Exchange is peace of mind, competency, and dependability. These attributes are not exclusive to local businesses, in fact they might be more commonly found with a national QI.  
When considering a QI for a 1031 Exchange, the decision shouldn’t be based on proximity, but rather several other factors that have a greater impact on the exchange, including the following:

Experience & Expertise 

Local: Knowledgeable of specific local regulations & transactions, smaller volume of cases, limited expertise in complex transactions

National: Knowledgeable of wide range of regulations & transactions across different states, larger volume of cases, greater expertise with complex transactions 

Resources to Scale 

Local: May be more limited on resources, work on a smaller scale with fewer cases, locally concentrated network

National: Typically, robust resources and efficient handling of large volume of cases, wider network of professionals 

Risk Mitigation 

Local: Might not be able to offer the same level of risk mitigation 

National: Likely to have strong insurance coverage and bonding in place, added safeguards for clients  

While both types of QIs have their benefits, national QIs tend to offer wider expertise, resources, and risk management capabilities. However, the decision ultimately depends on individual needs, transactional complexity, and personal preferences.  
State Regulations for QIs 
When selecting a Qualified Intermediary, there are many options to choose from, some local and some national. While the idea of a local QI may seem attractive, a nationally recognized QI could provide the Exchanger with a better experience and more robust knowledge of the rules & regulations of IRC Section 1031, including the most recent court cases.  
It’s important to remember there is no federal regulation of Qualified Intermediaries, however there are some state-level regulations in a handful of states that are meant to protect the Exchanger when facilitating an exchange with Relinquished Property within that state. We will focus on Colorado, Accruit’s headquarters, and California, a state with some of the most extensive requirements for Qualified Intermediaries.  
Colorado 
Requirements for Qualified Intermediaries conducting 1031 Exchanges vary from state-to-state. In 2009, Colorado’s legislature passed Senate Bill 1007, Chapter 708  which include: 

Identical fidelity bond and Errors & Omissions (E&O) policy. 

QIs must act as custodians and maintain strict management of client funds. 

The California Franchise Tax Board mandates QIs to withhold 31/3% of the sales price for the Exchanger if the exchange fails. 

For 1031 Exchanges involving out-of-state property, California enforces a “claw back”

When a group was asked “According to the IRS, what does ‘Qualified’ mean?” in regard to a Qualified Intermediary in a 1031 Exchange, answers included, knowledgeable, honest, educated, and meet certain security requirement per the IRS. Logical responses and assumptions, but they are not accurate. “Qualified”, according to the IRS, simply means that they are not disqualified.
Disqualified Parties in a 1031 Exchange
If “Qualified” only means not disqualified, who is disqualified to act as a Qualified Intermediary (QI) in a 1031 Exchange? The Exchanger for one; an Exchanger cannot act as their own QI, based on the rule that an Exchanger cannot be in “actual or constructive receipt of the sale proceeds.” Additionally, a relative of the Exchanger cannot be the QI, nor can an agent of the Exchanger, which would include an employee, attorney, accountant, investment banker, real estate agent or broker of the Exchanger within the last two years. Aside from these disqualified parties, nearly anyone can act as the Qualified Intermediary.
Regulations on Qualified Intermediaries
Most people are shocked to find out that there are no federal regulations or licensing requirements on 1031 Exchange Qualified Intermediaries. QIs are not overseen by any governing body, including the IRS and state Banking Departments. There are eight states in the country that regulate QIs on the state-level including, New Hampshire, Virginia, Washington, Nevada, Idaho, Colorado, California, and Maine. All other states have no requirements or regulations on QIs.
Even states with regulations can face security issues. Some time ago, a QI based in a suburb of Las Vegas disappeared with an estimated $87 million dollars. In another example, a QI had invested 50% of the exchange funds in FTX cryptocurrencies. FTX crypto plummeted and investors with their exchange funds at this particular QI were told that they were only getting 50% of their money back. The long reaching effects of this are yet to be seen, but one thing is for sure: The investors that had their exchange funds with these particular QIs not only lost their money, but will also have to pay the capital gains taxes on the sale of their investment property, because they have a failed 1031 Exchange. This is a horrible situation that could have been avoided if the Exchangers had known what to look for in a reputable Qualified Intermediary.
While there isn’t a federal governing body over Qualified Intermediaries, there is a national trade organization, the Federation of Exchange Accommodators (FEA), formed in 1989 to represent Qualified Intermediaries and affiliates of the 1031 Exchange industry. Many of the most reputable 1031 Exchange Qualified Intermediaries are members of the FEA. The FEA promotes the 1031 Exchange industry through established ethical standards for QIs, innovation and collaboration amongst industry colleagues, and education for both industry members, as well as the general public on the benefits of 1031 Exchanges.
Identify A Qualified, Qualified Intermediary
As mentioned above, the extent of being “Qualified” ranges widely. So, what should you look for in a Qualified Intermediary? Qualified Intermediaries in the industry range from the small sole proprietor to the large corporately owned firms. They all facilitate 1031 Exchanges, but the level of service, expertise, and security can still differ a great deal so finding the right QI is essential. As consumers, one of the biggest factors in determining which QI to use should be the security of exchange funds. At a minimum, an Exchanger should look for some form of bonding, errors and omissions insurance, third-party reconciliation of the exchange funds, and all disbursements should require two signatures.
Additional layers of security could include:

Annual audits conducted by reputable accounting firms.
 
Exchange funds are specifically identified to each exchange account through a sub-accounting banking system.
 
Exchange funds are professionally managed by a third-party investment firm, not the corporate parent or an employee of the Qualified Intermediary.
 
Funds are held in custodial accounts with a large national bank. This is significant protection over a bank deposit account because a custody account is not considered to be an asset of the bank. Custodial accounts would not be subject to general creditors in the unlikely event of a bank failure.
 
Sarbanes-Oxley compliance – if you select a QI owned by a publicly traded corporate parent. Sarbanes-Oxley is a federal law passed in response to a number of major corporate and accounting scandals involving Enron, Tyco International and MCI/WorldCom, etc.

When it comes time to set up a 1031 Exchange with a Qualified Intermediary, thoroughly vet the options to ensure you are truly getting a “Qualified” Qualified Intermediary.
 
The material in this blog is presented for informational purposes only. The information presented is not investment, legal, tax or compliance advice. Accruit performs the duties of a Qualified Intermediary, and as such does not offer or sell investments or provide investment, legal, or tax advice.

When a group was asked “According to the IRS, what does ‘Qualified’ mean?” in regard to a Qualified Intermediary in a 1031 Exchange, answers included, knowledgeable, honest, educated, and meet certain security requirement per the IRS. Logical responses and assumptions, but they are not accurate. “Qualified”, according to the IRS, simply means that they are not disqualified.
Disqualified Parties in a 1031 Exchange
If “Qualified” only means not disqualified, who is disqualified to act as a Qualified Intermediary (QI) in a 1031 Exchange? The Exchanger for one; an Exchanger cannot act as their own QI, based on the rule that an Exchanger cannot be in “actual or constructive receipt of the sale proceeds.” Additionally, a relative of the Exchanger cannot be the QI, nor can an agent of the Exchanger, which would include an employee, attorney, accountant, investment banker, real estate agent or broker of the Exchanger within the last two years. Aside from these disqualified parties, nearly anyone can act as the Qualified Intermediary.
Regulations on Qualified Intermediaries
Most people are shocked to find out that there are no federal regulations or licensing requirements on 1031 Exchange Qualified Intermediaries. QIs are not overseen by any governing body, including the IRS and state Banking Departments. There are eight states in the country that regulate QIs on the state-level including, New Hampshire, Virginia, Washington, Nevada, Idaho, Colorado, California, and Maine. All other states have no requirements or regulations on QIs.
Even states with regulations can face security issues. Some time ago, a QI based in a suburb of Las Vegas disappeared with an estimated $87 million dollars. In another example, a QI had invested 50% of the exchange funds in FTX cryptocurrencies. FTX crypto plummeted and investors with their exchange funds at this particular QI were told that they were only getting 50% of their money back. The long reaching effects of this are yet to be seen, but one thing is for sure: The investors that had their exchange funds with these particular QIs not only lost their money, but will also have to pay the capital gains taxes on the sale of their investment property, because they have a failed 1031 Exchange. This is a horrible situation that could have been avoided if the Exchangers had known what to look for in a reputable Qualified Intermediary.
While there isn’t a federal governing body over Qualified Intermediaries, there is a national trade organization, the Federation of Exchange Accommodators (FEA), formed in 1989 to represent Qualified Intermediaries and affiliates of the 1031 Exchange industry. Many of the most reputable 1031 Exchange Qualified Intermediaries are members of the FEA. The FEA promotes the 1031 Exchange industry through established ethical standards for QIs, innovation and collaboration amongst industry colleagues, and education for both industry members, as well as the general public on the benefits of 1031 Exchanges.
Identify A Qualified, Qualified Intermediary
As mentioned above, the extent of being “Qualified” ranges widely. So, what should you look for in a Qualified Intermediary? Qualified Intermediaries in the industry range from the small sole proprietor to the large corporately owned firms. They all facilitate 1031 Exchanges, but the level of service, expertise, and security can still differ a great deal so finding the right QI is essential. As consumers, one of the biggest factors in determining which QI to use should be the security of exchange funds. At a minimum, an Exchanger should look for some form of bonding, errors and omissions insurance, third-party reconciliation of the exchange funds, and all disbursements should require two signatures.
Additional layers of security could include:

Annual audits conducted by reputable accounting firms.
 
Exchange funds are specifically identified to each exchange account through a sub-accounting banking system.
 
Exchange funds are professionally managed by a third-party investment firm, not the corporate parent or an employee of the Qualified Intermediary.
 
Funds are held in custodial accounts with a large national bank. This is significant protection over a bank deposit account because a custody account is not considered to be an asset of the bank. Custodial accounts would not be subject to general creditors in the unlikely event of a bank failure.
 
Sarbanes-Oxley compliance – if you select a QI owned by a publicly traded corporate parent. Sarbanes-Oxley is a federal law passed in response to a number of major corporate and accounting scandals involving Enron, Tyco International and MCI/WorldCom, etc.

When it comes time to set up a 1031 Exchange with a Qualified Intermediary, thoroughly vet the options to ensure you are truly getting a “Qualified” Qualified Intermediary.
 
The material in this blog is presented for informational purposes only. The information presented is not investment, legal, tax or compliance advice. Accruit performs the duties of a Qualified Intermediary, and as such does not offer or sell investments or provide investment, legal, or tax advice.

When a group was asked “According to the IRS, what does ‘Qualified’ mean?” in regard to a Qualified Intermediary in a 1031 Exchange, answers included, knowledgeable, honest, educated, and meet certain security requirement per the IRS. Logical responses and assumptions, but they are not accurate. “Qualified”, according to the IRS, simply means that they are not disqualified.
Disqualified Parties in a 1031 Exchange
If “Qualified” only means not disqualified, who is disqualified to act as a Qualified Intermediary (QI) in a 1031 Exchange? The Exchanger for one; an Exchanger cannot act as their own QI, based on the rule that an Exchanger cannot be in “actual or constructive receipt of the sale proceeds.” Additionally, a relative of the Exchanger cannot be the QI, nor can an agent of the Exchanger, which would include an employee, attorney, accountant, investment banker, real estate agent or broker of the Exchanger within the last two years. Aside from these disqualified parties, nearly anyone can act as the Qualified Intermediary.
Regulations on Qualified Intermediaries
Most people are shocked to find out that there are no federal regulations or licensing requirements on 1031 Exchange Qualified Intermediaries. QIs are not overseen by any governing body, including the IRS and state Banking Departments. There are eight states in the country that regulate QIs on the state-level including, New Hampshire, Virginia, Washington, Nevada, Idaho, Colorado, California, and Maine. All other states have no requirements or regulations on QIs.
Even states with regulations can face security issues. Some time ago, a QI based in a suburb of Las Vegas disappeared with an estimated $87 million dollars. In another example, a QI had invested 50% of the exchange funds in FTX cryptocurrencies. FTX crypto plummeted and investors with their exchange funds at this particular QI were told that they were only getting 50% of their money back. The long reaching effects of this are yet to be seen, but one thing is for sure: The investors that had their exchange funds with these particular QIs not only lost their money, but will also have to pay the capital gains taxes on the sale of their investment property, because they have a failed 1031 Exchange. This is a horrible situation that could have been avoided if the Exchangers had known what to look for in a reputable Qualified Intermediary.
While there isn’t a federal governing body over Qualified Intermediaries, there is a national trade organization, the Federation of Exchange Accommodators (FEA), formed in 1989 to represent Qualified Intermediaries and affiliates of the 1031 Exchange industry. Many of the most reputable 1031 Exchange Qualified Intermediaries are members of the FEA. The FEA promotes the 1031 Exchange industry through established ethical standards for QIs, innovation and collaboration amongst industry colleagues, and education for both industry members, as well as the general public on the benefits of 1031 Exchanges.
Identify A Qualified, Qualified Intermediary
As mentioned above, the extent of being “Qualified” ranges widely. So, what should you look for in a Qualified Intermediary? Qualified Intermediaries in the industry range from the small sole proprietor to the large corporately owned firms. They all facilitate 1031 Exchanges, but the level of service, expertise, and security can still differ a great deal so finding the right QI is essential. As consumers, one of the biggest factors in determining which QI to use should be the security of exchange funds. At a minimum, an Exchanger should look for some form of bonding, errors and omissions insurance, third-party reconciliation of the exchange funds, and all disbursements should require two signatures.
Additional layers of security could include:

Annual audits conducted by reputable accounting firms.
 
Exchange funds are specifically identified to each exchange account through a sub-accounting banking system.
 
Exchange funds are professionally managed by a third-party investment firm, not the corporate parent or an employee of the Qualified Intermediary.
 
Funds are held in custodial accounts with a large national bank. This is significant protection over a bank deposit account because a custody account is not considered to be an asset of the bank. Custodial accounts would not be subject to general creditors in the unlikely event of a bank failure.
 
Sarbanes-Oxley compliance – if you select a QI owned by a publicly traded corporate parent. Sarbanes-Oxley is a federal law passed in response to a number of major corporate and accounting scandals involving Enron, Tyco International and MCI/WorldCom, etc.

When it comes time to set up a 1031 Exchange with a Qualified Intermediary, thoroughly vet the options to ensure you are truly getting a “Qualified” Qualified Intermediary.
 
The material in this blog is presented for informational purposes only. The information presented is not investment, legal, tax or compliance advice. Accruit performs the duties of a Qualified Intermediary, and as such does not offer or sell investments or provide investment, legal, or tax advice.

As with most service industries, not all Qualified Intermediaries (QIs) are created equal, nor do all QIs service their clients with the same standards and expectations in place. Below is a list of criteria you should evaluate prior to selecting a Qualified Intermediary to facilitate your 1031 exchange.

Bigger Isn’t Always Better
It is easy to assume that the largest company might be the best option, but that is seldom the case. We estimate that roughly 30% of the Live Chats we received through our website are from individuals and tax advisors that have a 1031 exchange open with a different QI but are unable to get in touch with them to answer their time sensitive questions in relation to their 1031 exchange, and so they reach out to us.
 
Easy Accessibility
Today’s consumer wants accessibility at their fingertips, and with today’s technology why shouldn’t they get it? When evaluating QI options, pay special attention to how easily you will be able to contact them in the future.
 

Do they have a (800) number? Does a real person answer the call without you having to push several buttons to navigate an automated system? Will you have the ability to speak with an attorney, Certified Exchange Specialist®, or other subject matter expert regarding thorny situations?
 
Do they have a live chat on their website, with a real specialist on the other end available to quickly answer your questions?
 

QI Roster
A QI is only as good as its employees. When researching your QI options, look into the breakdown of their internal team.
 

Do they have on-staff attorneys specializing in 1031 Exchanges? Not all 1031 exchanges are cut and dry; some have complex aspects and nuances that require a specialized 1031 exchange attorney to ensure validity regarding IRC 1031. If the QI doesn’t have on-staff attorneys, you can expect delays and sometimes increased fees to bring in outside council.
 
What is their largest department? If it is not the Service department, then you might infer service isn’t their priority. A QI set-up with an adequate service and processing team will be set-up for successfully processing 1031 exchanges.
 

You Get What You Pay For
As with most things, when it comes to a 1031 exchange, you get what you pay for. Pricing is often reflective of the level of personal attention you will receive throughout the process. Companies that offer the lowest price do so by offering minimal touchpoints with their clients, and often minimal experience among their staff. Their goal is quantity, not quality. Similarly, companies that offer flat-rate pricing are not considering the unique aspects that accompany most 1031 Exchanges. 1031 Exchanges are not one size fits all and therefore a flat-rate pricing model doesn’t work.

If you are looking to start a 1031 Exchange, we encourage you to reach out to various QIs and then evaluate their overall service offerings. Ask yourself the following questions of each QI: Were they easy to get ahold of via phone, live chat, email? Did they offer 1031 Exchange information and answers without charge? Do they have sufficient expertise and servicing team members?
At Accruit, we pride ourselves on providing the world class customer service with a consistent Net Promoter Score of over 80; we have received over 200 5-star Google reviews from our valued clients; and perhaps most telling, over 93% of our clients are repeat customers or direct referrals from other companies within the real estate industry. Additionally, Accruit has five on-staff attorneys that are 1031 exchange subject matter experts boosting over 100 years collective experience.
If you have any questions or would like more information on our 1031 Exchange services, please reach out to us today!