Frequently asked questions.

• What’s the difference between Accruit and a qualified intermediary?
  
• When does money go to the qualified intermediary service?
  
• Does Accruit’s Exchange Manager actually fill out tax forms automatically?
  
• What is a like-kind exchange (LKE)?
  
• What's the advantage of doing like-kind exchanges electronically?
  
• Is Accruit’s process secure and safe?
  
• What does the qualified intermediary do with my money?
  
• Does Accruit give me reports on the funds I have deposited with the qualified intermediary?
  
• Are LKEs approved by the IRS?
  
• Are there benefits other than tax deferral?
  
• Is this process patented?
  

Q: What’s the difference between Accruit and a qualified intermediary?

A: Actually, Accruit’s services include many elements of the QI function. However, our Exchange Manager takes them to a new level by giving you end-to-end management of the process to maximize your benefit and reduce your internal cost of completing exchanges. This can save a tremendous amount of accounting and tax preparation time.

Some things cannot be automated. Part of the QI function is to receive, hold, and manage client funds. Accruit has the financial depth, industry background, and on-the-ground team needed for a full function QI service. We offer unsurpassed technical solutions combined with premier QI capabilities. As far as we know, no other QI comes close to offering the same services.


Q: When does money go to the qualified intermediary service?

A: Accruit handles this in different ways, depending on your preferences and business requirements. Often, the best practice is to have all asset sales run through Exchange Manager. The purchaser pays the money to the QI account held for your benefit, and this transaction is recorded in Exchange Manager. That money can then be used to purchase property for a qualified exchange.

Sometimes more funds are needed for asset purchases than are available in your account. You may transfer funds to the QI account using a convenient Exchange Manager utility.


Q: Does Accruit’s Exchange Manager actually fill out tax forms automatically?

A: Not exactly, but it does provide all the line-item information needed for your tax forms and the required attachments.


Q: What is a like-kind exchange (LKE)?

A: An LKE is a process by which a business disposes of one asset, acquires another similar asset, and defers income tax on the transaction. Since your investment is still in the same type of asset, Congress has allowed deferral of gain on the exchange since 1921. Section 1031(a) of the Internal Revenue Code (from which the so-called "1031 exchange" gets its name) reads, in part, as follows:

"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment purposes if such property is exchanged solely for property of a like-kind that is to be held for either productive use in trade or business or investment purposes."


Q: What's the advantage of doing like-kind exchanges electronically?

A: Most LKEs transacted today are done through paper-based processes that require an inordinate amount of time and attention.

• They are complex and confusing;
  
• Require the collection and preservation of information that affects taxes;
  
• Force the manual matching of sales and purchases of like-kind assets together;
  
• Modify your depreciation methods; and
  
• Fail if specific, critical deadlines are not met.
  

In short, they are not worth the time, cost, or trouble if there isn't a lot of money at stake. As a result, the majority of LKEs transacted today are for high-value assets and real estate.

By contrast, electronic LKEs are particularly useful for exchanges of assets with lower per-item value and higher frequency of sale that necessitate an automated approach. This includes virtually any item of equipment or other depreciable property that is routinely bought and sold in the normal course of business.

Electronic LKEs instantly track the transaction process, issue wiring instructions, provide alerts about critical time deadlines, register the receipt and disbursement of funds, and assure a complete record that satisfies the safe harbor guidelines under Internal Revenue Code §1031.


Q: Is Accruit’s process secure and safe?

A: We take security seriously. Accruit conducts regular security audits and in-depth system reviews to ensure that the system achieves the highest security and reliability standards.


Q: What does the qualified intermediary do with my money?

A: Your money held by our QI service is invested conservatively in AAA-rated money market accounts or other similar investments that protect your principal.


Q: Does Accruit give me reports on the funds I have deposited with the qualified intermediary?

A: Exchange Manager shows you account statements that are reconciled daily with the QI’s bank account. You will be provided information on funds received, funds not received to date, cash disbursements, pending disbursements and any other account activity.


Q: Are LKEs approved by the IRS?

A: The origins of property exchanges go back almost to the beginning of income taxation, to 1921. In recent decades, various decisions and rulings have successively reinforced the validity of Like-Kind Exchanges and extended their application to deferred exchanges (§1031) and, during 2000, to reverse exchanges (buy first, sell later (Rev. Proc. 2000-37)).
Like-Kind Exchanges are common in the real estate industry, with the Federation of Exchange Accommodators estimating that up to $100 billion in exchanges occur annually. Although they have been less common for personal property, they are nonetheless legitimate, with their own complete set of rules.



Q: Are there benefits other than tax deferral?

A: While Exchange Manager’s primary purpose is handling LKEs, resulting in tax deferrals, you will also be able to get detailed asset tracking and depreciation calculations.


Q: Is this process patented?

A: Accruit has applied for numerous patents on its method of business and web-based approach to like-kind exchanges.