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Case Study: Veteran Qualified Intermediary Shifts to Managed Service Tripling Revenue

This is a true story, based on facts. Learn how Managed Service became the perfect solution for a veteran Qualified Intermediary company that wanted to reduce their workload as they transitioned toward retirement.
Managed Service by Accruit for veteran qualified intermediary looking to start semi-retirement

A veteran Qualified A person acting to facilitate an exchange under section 1031 and the regulations. This person may not be the taxpayer or a disqualified person. Section 1.1031(k)-1(g)(4)(iii) requires that, for an intermediary to be a qualified intermediary, the intermediary must enter into a written "exchange" agreement with the taxpayer and, as required by the exchange agreement, acquire the relinquished property from the taxpayer, transfer the relinquished property, acquire the replacement property, and transfer the replacement property to the taxpayer. Intermediary company, QI ABC, facilitates roughly 25-30 exchanges per month. They want to reduce their workload as they transition toward retirement, but they are not ready to shut down shop altogether. QI ABC realizes the value of the business is tied directly to the principals. Therefore, selling the business is not a lucrative option unless they maintain working in the business at a similar level, defeating the purpose of scaling down. QI ABC looks for options to begin enjoying the fruits of their labor, while maintaining a revenue stream that supports semi-retirement. But their options are sparse. The QI could reduce the number of 1031 exchanges they will accept and process, but eventually this erodes their reputation and eventually will eliminate their revenue stream entirely. Learn how Accruit’s Managed Service, a white-label QI solution for 1031 exchanges, became the solution for this Qualified A person acting to facilitate an exchange under section 1031 and the regulations. This person may not be the taxpayer or a disqualified person. Section 1.1031(k)-1(g)(4)(iii) requires that, for an intermediary to be a qualified intermediary, the intermediary must enter into a written "exchange" agreement with the taxpayer and, as required by the exchange agreement, acquire the relinquished property from the taxpayer, transfer the relinquished property, acquire the replacement property, and transfer the replacement property to the taxpayer. Intermediary .

The Facts

QI ABC has been in the 1031 exchange business for over 30 years, the partners are both gearing toward retirement and are looking for options to reduce their workload, maintain a legacy, and make a profit off the business they built over to past three decades.

The Problem

Knowing the desire to retire was on the near horizon, QI ABC started to look at their options for entering semi-retirement and turning a profit from the long-term business they built. When QI ABC investigated selling their Qualified A person acting to facilitate an exchange under section 1031 and the regulations. This person may not be the taxpayer or a disqualified person. Section 1.1031(k)-1(g)(4)(iii) requires that, for an intermediary to be a qualified intermediary, the intermediary must enter into a written "exchange" agreement with the taxpayer and, as required by the exchange agreement, acquire the relinquished property from the taxpayer, transfer the relinquished property, acquire the replacement property, and transfer the replacement property to the taxpayer. Intermediary business, they realized the value in their QI business was themselves. Their QI business was built upon their industry reputation and without them involved in the day-to-day, QI ABC was not valuable to an outsider buyer.

QI ABC knew that the status quo was not a solution because they could not maintain the same workload and output as they look to enter semi-retirement.

QI ABC had run out of ideas and options, but they were committed to finding a solution as they entered their golden years.

The Solution: Managed Service through The transfer of the relinquished property to the Qualified Intermediary, and the receipt of the replacement property from the Qualified Intermediary is considered an exchange. To be compliant with IRC Section 1031, the transaction must be properly structured, rather than being a sale to one party followed by a purchase from another party. Exchange Manager ProSM

QI ABC received an email from fellow FEA member Accruit about their Managed Service offering through The transfer of the relinquished property to the Qualified Intermediary, and the receipt of the replacement property from the Qualified Intermediary is considered an exchange. To be compliant with IRC Section 1031, the transaction must be properly structured, rather than being a sale to one party followed by a purchase from another party. Exchange Manager ProSM and began a conversation about business possibilities going forward. Knowing Accruit was a renowned player in the Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange industry, QI ABC, determined that a turnkey, white-label Qualified Intermediary solution, might just be the solution for them.

Implementing Managed Service, QI ABC can continue to offer 1031 services “in-house” under their existing brand. To their client base, there is no noticeable change in service to get a 1031 exchange started. Once the 1031 exchange is initiated by QI ABC, the The transfer of the relinquished property to the Qualified Intermediary, and the receipt of the replacement property from the Qualified Intermediary is considered an exchange. To be compliant with IRC Section 1031, the transaction must be properly structured, rather than being a sale to one party followed by a purchase from another party. Exchange Manager ProSM team of 1031 experts work behind the scenes as the back-office qualified intermediary to facilitate the 1031 exchanges.

Upon further conversations with Accruit on their Managed Service offering, QI ABC learned of the following benefits they would receive as a Managed Service client:

  • QI ABC, would leverage the buying power of a national QI which could earn them more revenue from depository funds
  • QI ABC’s branding would remain intact and pre-designed marketing collateral would be provided
  • QI ABC is electronically notified and informed on every step of the 1031 process
  • QI ABC’s workload would be reduced by roughly 80%

Implementing Managed Service would allow QI ABC to continue business as usual without sacrificing transactional volume. Yet, they would greatly reduce their internal efforts because Accruit’s Managed Service is facilitating the actual 1031 exchanges through the industry’s only 1031 exchange workflow solution.

The Result

QI ABC couldn’t be happier with their decision to implement Managed Service. After three decades, within nine months, QI ABC saw the following benefits:

  • Workload reduction by roughly 80%
  • Leveraged the “buying power” of a larger QI, producing up to 300% of previous revenue per transaction compared to Managed Service
  • Took first uninterrupted vacation in many years

As a seasoned Qualified Intermediary company, aware of the due diligence required to set-up a new Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange , QI ABC, seamlessly transitioned into Managed Service. Accruit’s Exchange Manager ProSM, the patented 1031 exchange workflow, made the data and document collection and delivery secure and timely for all parties involved.

Are you a QI looking for options? Maybe you want to scale back your personal efforts in your business without affecting your revenue. Maybe you want to leverage the “buying power” of a larger QI?

Learn more about Managed Service and how it could benefit your existing Qualified A person acting to facilitate an exchange under section 1031 and the regulations. This person may not be the taxpayer or a disqualified person. Section 1.1031(k)-1(g)(4)(iii) requires that, for an intermediary to be a qualified intermediary, the intermediary must enter into a written "exchange" agreement with the taxpayer and, as required by the exchange agreement, acquire the relinquished property from the taxpayer, transfer the relinquished property, acquire the replacement property, and transfer the replacement property to the taxpayer. Intermediary operations.

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