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The Role of the Qualified Intermediary

The use of a Qualified Intermediary,such as Eastern 1031 Starker Exchange L.L.C., is essential to completing an I.R.C. Section 1031 Tax Deferred Exchange. Eastern 1031, as a Qualified Intermediary, performs several vital functions in an exchange. Although we do not replace the role of competent legal and tax advisors, we do guide investors through the exchange process discussing the specific exchange requirements, generating the appropriate exchange documentation and safely managing the exchange proceeds.

Acts as a Principal

The IRS stipulates that a reciprocal trade or actual exchange must take place in each I.R.C. Section 1031 transaction. This means the Exchanger must assign to a Qualified Intermediary (1) their interest as seller of the relinquished property and (2) their interest as buyer of the replacement property. By becoming an actual party to the exchange, a reciprocal trade takes place even when there are three or more parties involved in an exchange transaction (i.e. when the Exchanger is purchasing the replacement property from someone other than the buyer of their relinquished property.)

Holds Exchange Proceeds

If the Exchanger actually or constructively receives any of the proceeds from the sale of their relinquished property, those proceeds will be taxable. Eastern 1031 will hold the proceeds from the sale in a separate escrow account until the funds are used to purchase the replacement property or properties. All exchange proceeds are held in FDIC insured escrow accounts. Eastern 1031 carries $1,000,000.00 in professional liability insurance per client.

Prepares Legal Documentation

Several legal documents are necessary in order to properly complete an exchange. As your Qualified Intermediary, Eastern 1031, will prepare an Exchange Agreement, Assignment Agreements, Cooperation Clauses and Exchange Closing Instructions for each settlement agent.

Provides Quality Service

Although the process of an I.R.C. Section 1031 exchange is relatively simple, the rules are complicated and filled with potential pitfalls. Eastern 1031 has developed an excellent reputation because of our unyielding commitment to our clients. We work closely with all parties involved to ensure a smooth transaction.

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