5. I don't need a qualified intermediary. I can simply have my attorney or accountant hold the sale proceeds until the replacement property is purchased.

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A qualified intermediary is essential to completing a valid delayed exchange. Basically, the IRS disqualifies any person or entity from acting as an intermediary, if that individual has had an existing business relationship with the taxpayer within the past two years.

Although that statement is somewhat broad, some parties who may be considered disqualified parties are the taxpayer's relatives, attorney, accountant and real estate broker. The IRS provides that neither the taxpayer, nor any disqualified person or entity, can come into receipt of the exchange funds during the exchange, or the exchange will be void. Using a well-established qualified intermediary enables a taxpayer to avoid situations that might void an otherwise valid exchange. It is also a good practice to research the expertise and security of the qualified intermediary.

Todd R. Pajonas, Esq., is president of Security 1031 Services, Inc., a national qualified intermediary. He can be reached at todd@sos1031.com or 877-767-1031.