Congress in 1984 modified the internal revenue code section 1031 to include specific requirements to gain tax-free treatment. Since the rules in the revised section 1031 are so specific, it requires close attention to documentation and compliance to achieve a safe tax result. Over 90% of exchange transactions are classified as delayed exchanges with a qualified intermediary. In a delayed exchange the seller enters into an exchange agreement with a qualified intermediary. By regulation the qualified intermediary is party to the exchange but can not be the seller’s attorney, accountant, related party or person who has provided services to the taxpayer within the past two years. The qualified intermediary steps into the shoes of the seller by taking an assignment or transfer of the sales contract and holds the sales proceeds in trust for the seller’s benefit until replacement property can be purchased.

This is not a do-it yourself transaction