1031 liability

[STEPHAN]

What is the name of your state? Florida

I plan on a 1031 exchange. I have done this before. A CPA (Florida, Texas) and attorney (Texas) that I have bought a different property from in the past offered to be the qualified intermediary. He is not my CPA or attorney, so he has not represented me.

I have the idea that he is laxer on the rules than my previous intermediary. He is very experienced.

If he makes a mistake, is that his liability, or would that be my problem?

 

[quincy]

What is the name of your state? Florida

I plan on a 1031 exchange. I have done this before. A CPA (Florida, Texas) and attorney (Texas) that I have bought a different property from in the past offered to be the qualified intermediary. He is not my CPA or attorney, so he has not represented me.

I have the idea that he is laxer on the rules than my previous intermediary. He is very experienced.

If he makes a mistake, is that his liability, or would that be my problem?

I don’t see how you would be responsible for mistakes made by the intermediary.

 

[PayrollHRGuy]

I don’t see how you would be responsible for mistakes made by the intermediary.

I don't know a lot about 1031 exchanges but there are plenty of situations where one is liable for the errors of another.

 

[quincy]

I don't know a lot about 1031 exchanges but there are plenty of situations where one is liable for the errors of another.

Yes but here there is no representation of either party by the intermediary.

 

[doucar]

There is a potential liability for unpaid taxes, interest and penalties for the party to the transaction who gained the tax benefit.

 

[adjusterjack]

If he makes a mistake, is that his liability, or would that be my problem?

If he makes a mistake that costs you money, say - additional taxes - you pay.

Then you can seek compensation from him for his mistake.

 

[quincy]

There is a potential liability for unpaid taxes, interest and penalties for the party to the transaction who gained the tax benefit.

Any critical error by the intermediary could lead to the 1031 exchange being disqualified/voided. That could result in a tax liability. I was in error earlier.

 

[Taxing Matters]

Any critical error by the intermediary could lead to the 1031 exchange being disqualified/voided. That could result in a tax liability. I was in error earlier.

Correct. However, the OP may well be able to avoid paying penalties as a result of the intermediary's error. And the OP may well have a good negligence claim against the intermediary.

If something about an intermediary made be feel uncomfortable enough to have to ask this question I'd probably look for a different intermediary.

 

[STEPHAN]

Thank you all! I thought so. Just wanted to make sure. He is a CPA and attorney, and it might have been that he just knows better.

 

[quincy]

Thank you all! I thought so. Just wanted to make sure. He is a CPA and attorney, and it might have been that he just knows better.

One concern I might have is that the CPA/attorney “offered” to be your intermediary rather than you seeking him out. If you are not comfortable with how “lax” he appears to be with the rules, or there are other potential red flags, you could be wise to look for another intermediary.

Good luck.