Qualified Intermediary (QI)
A Qualified Intermediary is the independent party that must hold the proceeds from the relinquished property sale so the funds never touch the seller's hands — a precondition for a valid 1031 exchange. The QI must be engaged before the apartment sale closes. QI selection matters because a QI failure (bankruptcy or fraud) can void the exchange.
Key Points¶
- Must be engaged before closing on the sale of the relinquished property.
- Cannot be the taxpayer's CPA, attorney, broker, or employee within the prior two years.
- Reputable QIs use segregated trust accounts, fidelity bonds, E&O insurance, and SOC 1 audits.
- A QI failure can mean losing the exchange — choose a well-capitalized firm.