Disqualified Parties for IRC 1031 Tax Deferred Exchange

In order to have a properly structured delayed exchange pursuant to IRC §1031 it is necessary to utilize the services of a Qualified Intermediary. The use of a Qualified Intermediary satisfies the “safe harbor” requirements under Treas. Reg 1.1031(k)-1(g)(4). Although technically anyone can act as a Qualified Intermediary, it is important not to have a “disqualified party” in this role. A disqualified party is defined by Treas. Reg. 1.1031(k)-1(k) as someone who is an agent of the taxpayer at the time of the exchange. If a taxpayer utilizes a disqualified party in the role of the Qualified Intermediary the exchange will most likely fail.

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