Wholesaling 1031 Tax Exchange Properties

[Tamara MacDowell]

I have under contract two different properties requesting a 1031 Exchange. Is it allowed to play “MatchMaker” aka Wholesale, by bringing the two together, assigning my interest in the transaction and collect an assignment fee? For instance, A property is located in Arizona I have under contract. B property is in North Carolina I also have under contract. Can I Assign my interest in Property A to owner of Property B and Assign my contract for Property B to the Owner of Property A in a 1031 Tax Exchange and collect my Assignment Fee? Thank You  

[Dave Foster]

@Tamara MacDowell, It's conceivable that you could do that.  However, that course of action is fraught with legal peril for you.  To do that you are acting as the qualified intermediary for a simultaneous 1031 exchange.  Valuation variations could easily create a taxable event.  Documentation is specific and necessary.  And then there's the matter of your fee.  By itself that fee could indeed create an agency relationship with those owners.  And that then disqualifies you from acting in the QI capacity.  But If it's legal to put that on the settlement statement then it would be no problem to craft an exchange that would work for you.

But if you can't get your fee on the settlement statement because you're not a licensed realtor then you'll have to figure out a way to get paid outside of closing because allowable expenses in a 1031 exchange have to be on the settlement statement or they become taxable to the seller.