UPDATED: Exchange Industry Tries To Clean House: A 1031 Cautionary Tale Part 3

In an Effort To Overcome Damage from Recent Financial Intermediary Failures, 1031 Exchange Industry Steps into Action

A spate of recent troubles involving a handful of financial intermediaries of 1031 tax free exchanges has sent the industry reeling from the negative publicity. In response, one industry group, the Federation of Exchange Accommodators (FEA), is hoping to overcome the recent publicity by "weeding out" unscrupulous firms from the industry and at the same time inviting regulators to provide more oversight in order to reassure jittery investors.

Section 1031 of the U.S. tax code allows investors to sell off some investments without paying taxes on the gain so long as the proceeds are passed back -- or exchanged -- into a like-kind investment within 180 days. Since being enacted basically in its present form in the early 1990s, this provision in the code has allowed literally billions of dollars a year to flow through just a few hundred financial intermediaries - called qualified intermediaries (QIs) -- with little to no oversight from state or federal regulators over what these QIs can do with the money during the 180-day holding period.
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