Title Exchange Company participates in 1031 deferred exchanges as a "qualified intermediary." In essence, that function involves the following:
1. At or prior to the sale of the "relinquished property" by the taxpayer, we prepare and contract with the taxpayer an "exchange agreement" which sets up our relationship as the intermediary in the transaction.
2. Upon closing the sales of the "relinquished property", the closing attorney disburses the sales proceeds to Title Exchange Company as "seller." This is in accordance with the exchange agreement. The taxpayer executes the act of sale under the IRS regulations allowing for "direct deeding."
3. The sales proceeds are deposited in our intermediary account which is held by the trust department of Iberia Bank and are subject to the restrictions set forth in the exchange agreement.
4. The taxpayer has 45 days to "identify replacement properties" for the property relinquished by him and 180 days to close on the property chosen by him in order to treat the transaction as a "like-kind exchange" and defer the gain. The taxpayer must give us written notification of his identification of the replacement property.
5. When the taxpayer acquires the replacement property, we disburse the monies held to the closing attorney in accordance with the exchange agreement and the exchange is completed.
It is important to note that the taxpayer's real estate broker, attorney, and accountant are specifically prohibited from serving as intermediary in these transactions.