PROVIDES CONSUMER PROTECTION FOR INVESTORS
The State of Virginia has enacted a new law regulating qualified intermediaries who facilitate tax deferred exchanges involving relinquished property located within Virginia. The Exchange Facilitators Act (the “Act”), which became effective on July 21, 2010, generally tracks the Model Act promoted by the Federation of Exchange Accommodators, a trade organization representing most professional qualified intermediaries. The Act provides several protections for exchangers who engage a qualified intermediary (“QI”) to facilitate a tax deferred exchange in a transaction covered by the Act. Although the full text of this law can be seen at Virginia Exchange Facilitators Act, some important highlights are reflected below:
- EXCHANGE FUNDS: The Act requires a QI to hold exchange funds either in separately identified accounts that require the taxpayer’s written authorization and a written acknowledgement of the QI for any withdrawals, or the use of a qualified escrow or qualified trust account as defined under Treasury Regulation §1.1031(k)-1(g)(3). The Act further requires that all exchange funds be held in a financial institution (as defined), except that the taxpayer may specifically direct the QI to invest exchange proceeds in an investment of the taxpayer’s choice, provided the QI provides written acknowledgment to the taxpayer that includes written confirmation of how the exchange funds will be invested. Similar to regulations established in other states, the Act prohibits the comingling of exchange funds with the QI’s operating funds and prohibits loans of exchange funds to parties related to the QI, with exception of loans to an Exchange Accommodation Titleholder (“EAT”) in the case of a reverse exchange. Finally, the Act provides that exchange funds are not subject to the attachment or execution on any claim against the QI
When selecting a Qualified Intermediary, many factors should be taken into consideration. Security of the exchange funds is paramount and the experience of the exchange counselors and staff is also critical. Call Asset Preservation, to learn more about The API Advantage™ and our commitment to the highest level of security for exchange proceeds and commitment to excellent customer service.