Updated June 17, 2026
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A qualified intermediary, also called an exchange facilitator or accommodator, is an independent third party who holds the sale proceeds from your relinquished property and uses them to fund the purchase of your replacement property. The QI keeps the money out of your hands for the entire exchange period. That is the whole point: the IRS's constructive receipt rules say that if you ever had the right to receive the funds, the gain is taxable. The QI exists to make sure you never did.
Why the QI is legally required
Under IRS regulations, if you receive or have the right to receive the sale proceeds, you have constructively received the money and owe tax on the gain. Routing funds through a QI under a written exchange agreement eliminates that constructive receipt. The agreement must be in place before the relinquished property closes. You cannot establish a 1031 exchange retroactively after the proceeds have already been distributed to you.
Who cannot be your QI
The IRS bars "disqualified persons" from serving as QI. That includes your attorney if they have represented you on non-exchange matters in the past two years, your CPA, your real estate agent, any employee of yours, and close family members or related entities. The list is longer than most people expect. The QI must be genuinely independent, not just legally unrelated.
What a QI actually does
- Prepares exchange agreement documents before the relinquished sale closes.
- Coordinates with the title company or escrow agent so proceeds go directly to the QI at closing, not to you.
- Holds the funds in a segregated account for the duration of the exchange period.
- Receives your written identification of replacement properties by day 45.
- Wires the exchange funds to the replacement title company or escrow at closing.
How to choose a QI
QIs are not licensed at the federal level, and there is no federal insurance protecting exchange funds if a QI fails. Given that the average exchange involves substantial sums, this matters. Choose a QI that holds funds in FDIC-insured segregated accounts per exchanger, carries fidelity bond and errors-and-omissions insurance, and is a member of the Federation of Exchange Accommodators (FEA). Fees for a standard forward exchange typically run $500 to $2,000.
Cross-links
See the 45-day and 180-day deadlines the QI helps you track, and the full exchange requirements checklist to confirm your transaction is properly structured.
This article is for educational purposes only and is not tax or legal advice. Rules are current as of the date above and may change. Consult a qualified intermediary and a tax professional before structuring any exchange.
See exactly what you would defer
Enter your sale price, adjusted basis, and mortgage payoff to see deferred gain, any boot, and cash available for reinvestment.