The term “1031” refers to the Internal Revenue Code section. A 1031 exchange is a method by which a property owner trades one or more relinquished properties for one or more replacement properties of like-kind. If the rules are properly followed, section 1031 provides that no gain or loss shall be recognized at the time of the exchange. Investors use 1031 exchanges to defer the capital gains taxes.

WHAT IS A QUALIFIED INTERMEDIARY?
A Qualified Intermediary (QI) is an independent party that facilitates the tax-deferred exchange. QI's are also referred to as "accommodators" or "exchange facilitators." When the taxpayer engages a QI, and all other rules involving constructive and actual receipt of funds are followed, the IRS does not consider the taxpayer to be in receipt of the funds as the QI is providing a safe harbor as established by the Treasury Regulations. The sale proceeds go directly to the QI. The QI holds the proceeds until they needed to acquire the replacement property. The QI then delivers the funds directly to the closing agent.

WHO IS DISQUALIFIED TO ACT AS MY QI?
A "disqualified" person is any one who has acted as an agent for the taxpayer in the past 2 years or has had a relationship with the taxpayer that is so close that the person is presumed to be under the control of the taxpayer. Examples include blood relatives, any person who is or has been the taxpayer’s attorney, accountant, investment banker or real estate agent within the two years prior to the closing of the relinquished property.