Qualified Intermediary Role & Responsibilities Flashcards
6 cards from real CES practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Qualified Intermediary Role & Responsibilities flashcards as text
Which of the following is a key due diligence step an exchanger should take when selecting a QI?
Answer: Verify the QI carries fidelity bond and errors & omissions insurance
A prudent exchanger should verify that the QI carries fidelity bond coverage and E&O insurance to protect against fraud or errors.
The QI's exchange agreement must be in place before what event to properly structure the exchange?
Answer: Before the taxpayer closes on the relinquished property
The exchange agreement must be executed before the closing of the relinquished property to prevent constructive receipt of the proceeds.
Can a QI provide legal or tax advice to the taxpayer as part of their exchange services?
Answer: No, QIs should refer taxpayers to their own independent legal and tax advisors
QIs are not tax or legal advisors; they should always refer taxpayers to independent qualified professionals for tax and legal guidance.
In a simultaneous exchange, how does the QI coordinate the transfer of funds and deeds?
Answer: The QI coordinates closing so that the relinquished and replacement property transfers happen on the same day
In a simultaneous exchange, the QI coordinates closings so both the relinquished and replacement properties transfer on the same day.
What is the significance of the 'safe harbor' provisions in the Treasury Regulations for QIs?
Answer: They allow the taxpayer to use a QI without triggering constructive receipt, as long as specific conditions are met
The safe harbor provisions under Treas. Reg. §1.1031(k)-1 establish conditions under which using a QI does not result in constructive receipt by the taxpayer.
What is the QI's responsibility when it receives the relinquished property proceeds at closing?
Answer: Hold the funds in a secure account and use them solely to acquire the replacement property
The QI must hold the exchange proceeds and use them exclusively for acquiring the replacement property as directed by the exchange agreement.