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Below we have provided some of the more frequently asked questions and answers relating to ES Group’s various 1031 services.
1. What is a Qualified Intermediary?

A Qualified Intermediary (“QI”) is an independent party who facilitates tax-deferred exchanges pursuant to Section 1031 of the Internal Revenue Code. The QI cannot be the taxpayer or a disqualified person. Acting under a written agreement with the taxpayer, the QI acquires the relinquished property and transfers it to the buyer. The QI will hold the sales proceeds to prevent the taxpayer from having actual or constructive receipt of the funds. Finally, the QI acquires the replacement property and transfers it to the taxpayer to complete the exchange before the end of the exchange period. 

While many people have an understanding of a like-kind exchange, we have found it is in the best interest of clients to specialize in this area because there are so many traps for the unwary. This is a highly technical subject area and after assisting hundreds of clients with this one type of transaction we “can see around corners” and help you troubleshoot problems before they exist.

2. What does “like-kind” mean?

Under 1031, all real property (as it is defined by state law) is considered "like-kind" with other real property of the same nature and quality. The following are examples of qualified "like-kind" real property exchanges:

  • Raw land for rental property
  • Single family rental for multi-family rental
  • Retail space for motel/hotel
  • Farms/ranch for golf course
  • 30-year leasehold interest for fee simple interest
  • Non-income producing raw land for income-producing rental property
3. What does the 1031 exchange process look like?
  • The taxpayer signs a contract to sell the relinquished property to the buyer
  • Prior to the property closing, the taxpayer retains ES Group to be the qualified intermediary
  • At the closing of the relinquished property, the exchange funds are wired or a check is sent to ES Group
  • Within 45 days after the transfer of the relinquished property, the taxpayer completes the Identification of Replacement Property exhibit and returns it to ES Group (if the taxpayer does not acquire all replacement property within the first 45 days)
  • The taxpayer has a maximum of 180 days in the exchange period (or until the tax filing deadline, including extensions, for the year of the sale of the relinquished property), to acquire any and all replacement properties
  • At the closing of the replacement property, ES Group wires the exchange funds or a check is sent to complete the exchange

4. What is a Self-Directed IRA?

The term "self-directed" specifies that you are choosing your IRA investments. There is no legal distinction between a traditional IRA and a "self-directed" IRA.

5. Why haven’t I heard about Self-Directed IRA’s?

Wall Street broker dealers, money managers and retirement plan providers have a vested fee and commission interest to restrict your IRA investment options to only those - stock, bond and mutual fund investments - that their firm offers. There is no vested fee or commission interest in discussing alternative investments.

6. How can a Self-Directed IRA be of value to me?

Self-directed IRAs can invest in real estate including commercial properties, raw land, rental properties, mobile homes, tax-liens, tax certificates, billboards, boat slips, condominiums, trust deeds and mortgages. Self-directed IRAs can also be used to invest in traditional stock, bond and mutual fund offerings.

7. In what assets can't a Self-Directed IRA invest?

The IRS defines the following assets as excluded (consequently - you cannot invest in them)

  • Collectibles (artwork, cars, antiques, rugs, metals, gems, wine, stamps, coins, etc)
  • Capital Stock in an "S" Corporation
  • Life Insurance Contracts
8. Is the process of establishing a Self-Directed IRA difficult?

No - all that's required is for an investor to make the decision to roll (or transfer) their existing retirement plan into a self-directed IRA. The investor is then free to decide from the various asset classes that the IRS allows – which will work best for their individual needs.

9. Who can best facilitate a Self-Directed IRA?

Self-Directed IRA trustees or custodians. Choosing your trustee or custodian is an important decision. Companies that specialize in the administration of self-directed accounts are usually the best option. While some companies may not offer full Trust powers and products they are streamlined to best service self-directed IRA customers at the most reasonable fee structure.

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