Utilizing a Qualified Intermediary In order to properly transact a §1031 Exchange and defer capital gains and other taxes associated with selling, an investor must not take constructive receipt of the proceeds (cash) from the sale of the relinquished property. The Treasury provides safe harbor guidelines that allow an investor to use a Qualified Intermediary (QI) to avoid taking constructive receipt of the funds in an exchange transaction. A QI, sometimes called an accommodator or facilitator, is any independent party that facilitates tax-deferred exchanges in accordance with IRS section 1031. The QI utilizes the funds from the sale of the relinquished property to purchase the replacement property. The QI must be independent and cannot be the investor, relatives of the investor, or any person deemed to be under direct control of the investor. This entity or person is an IRS-approved middleman, whose sole purpose is to document the exchange (Exchange Agreement and other documents), hold the proceeds on behalf of the Exchanger and structuring the sale of the relinquished property and purchase of the replacement property. Sign Up For Our Newsletter!