Three different jobs. A qualified intermediary (QI) runs the exchange so you never touch the sale proceeds. A CPA models the tax, watches boot and basis, and files Form 8824. An attorney handles legal structure when the deal is not a simple one-for-one. Your CPA and your attorney generally cannot be your QI if they have acted as your agent in the prior two years. Mixing the roles is how exchanges blow up.
This page answers who does what. For the exchange rules themselves, see our 1031 exchange rules guide and our 1031 exchange CPA service page.
The short answer
| Role | What they do | Required? |
|---|---|---|
| Qualified intermediary | Holds proceeds, documents the exchange, keeps you out of constructive receipt | Yes for a deferred (delayed) exchange |
| CPA / tax advisor | Tax modeling, boot, basis carryover, California add-ons, Form 8824 | Strongly recommended before you list |
| Attorney | Entity and title structure, contracts, partnerships, reverse or improvement deals | Often needed when the deal is complex, not for every simple exchange |
You almost always need a QI. You almost always want a CPA before the listing goes live. You need an attorney when ownership, partners, or the exchange form itself is complicated.
What the qualified intermediary does
In a deferred exchange, the regulations let you use a QI so the sale and purchase count as an exchange. Under Treas. Reg. §1.1031(k)-1(g)(4), a QI is a person who is not you and not a disqualified person, who enters a written exchange agreement with you, and who acquires the relinquished property from you, holds and transfers the proceeds under that agreement, and acquires and transfers the replacement property to you.
Practically, the QI:
- Prepares the exchange agreement and assignment documents
- Receives the buyer funds at closing so you do not take actual or constructive receipt
- Tracks the 45-day identification period and the 180-day exchange period
- Disburses funds to buy the replacement property
The QI is a custodian for the exchange. It is not your tax advisor. It is not your lawyer. It does not decide whether you should exchange, how much boot you can afford, or which entity should hold title.
Who cannot be your QI
§1.1031(k)-1(k) defines a disqualified person. That includes someone who has acted as your employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the two-year period ending on the transfer of the relinquished property. Related parties under §267(b) or §707(b) are also out. Routine financial, title, escrow, or trust services, and prior 1031 intermediary work itself, are carved out of that agent test. But your regular CPA and your deal attorney usually cannot put on a QI hat for the same client.
That is why exchange companies exist as a separate line of work. Independence is part of the safe harbor.
What your CPA does
The QI moves money and paper. The CPA answers the tax questions the QI will not:
- Should you exchange at all, or take a taxable sale (including the effect of any suspended passive losses)?
- How much gain is built in, including depreciation recapture?
- What counts as boot, and how do you keep debt replacement and cash matching under control? See how to protect a 1031 from taxable boot.
- Will the replacement property qualify, and how does basis carry over?
- How do California rules interact, including clawback issues on later sales?
- Who reports what on Form 8824 and on the state return?
Talk to the CPA before you accept an offer. Once you are under contract without exchange language and without a QI engaged, fixing constructive receipt is much harder. Our 1031 Exchange Tax Plan is the pre-deal version of that work when you want the numbers before you list.
Your CPA still cannot serve as your QI if they have been your accountant in the prior two years. We work with your QI. We do not replace the QI.
What an attorney does
An attorney is not required for every straightforward exchange of one investment property for another, held by one owner, with clean title. In that fact pattern, a QI plus a CPA often covers the exchange and the tax.
Bring in counsel when any of these show up:
- Multiple owners or a partnership where partners want different outcomes (cash-out vs exchange)
- Drop-and-swap or swap-and-drop timing around a partnership interest (see swap and drop)
- Reverse exchanges, improvement (build-to-suit) exchanges, or related-party exchanges
- Entity or title changes that could break the same-taxpayer rule
- Nonstandard purchase contracts, tenant-in-common or DST documents, or securities issues
- Estate or trust ownership that needs alignment before closing
The attorney's job is legal structure and documents. It is not holding the exchange funds. If your attorney has acted for you in the prior two years, that attorney is generally a disqualified person and cannot be the QI either.
How the three work together
A clean delayed exchange usually looks like this:
- CPA models gain, boot risk, and sale-vs-exchange before you list.
- You engage a QI before closing on the relinquished property.
- Listing and purchase contracts include cooperation and assignment language the QI needs.
- At closing, proceeds go to the QI, not to you.
- You identify replacement property within 45 days and close within 180 days.
- CPA prepares Form 8824 and the rest of the return. Attorney steps in only if structure requires it.
Skip the CPA and you can complete a mechanically valid exchange that still creates a bad tax result. Skip the QI and you often fail the exchange entirely. Skip the attorney on a partnership or reverse deal and you can break title or same-taxpayer rules even with a good QI.
Fees and what "cheap" costs
QI fees vary by company and by exchange type (forward, reverse, improvement). Autocomplete demand for "1031 exchange qualified intermediary fees" and "cost" is real. Compare fidelity of funds, experience with your exchange type, and how they handle wire fraud controls, not sticker price alone. A failed exchange on a large gain dwarfs a higher QI fee.
CPA fees depend on whether you need a full pre-deal plan or reporting after the fact. Attorney fees track complexity. None of the three should be chosen because they offered to "do it all." The regulations separate the QI on purpose.
California investors
California follows the federal exchange for many purposes, then has its own reporting and, in some cases, later clawback when property leaves the state system. Build California into the CPA model from day one. Our 1031 exchange CPA page covers how we work with LA investors and their QI team.
Common mistakes
- Asking your CPA or real estate attorney to hold the proceeds as QI when they are a disqualified person.
- Treating the QI as a tax advisor.
- Engaging the QI after you already have constructive receipt of the funds.
- Skipping tax modeling and discovering boot or basis problems after identification.
- Using an attorney for a simple one-for-one when a QI and CPA would have been enough, or skipping counsel on a partnership reverse exchange when you needed it.
Frequently asked questions
Do I need a lawyer for a 1031 exchange?
Not always. A simple one-property, one-owner delayed exchange often runs with a QI and a CPA. You want an attorney when entities, partners, reverse or improvement structures, related parties, or nonstandard contracts are involved.
Do I need a CPA if I already have a qualified intermediary?
Yes if you care about the tax result. The QI runs the exchange paperwork and holds the funds. It does not model boot, basis, suspended losses, California effects, or Form 8824. Those are CPA questions.
Can my CPA or attorney act as my qualified intermediary?
Generally no if they have acted as your accountant or attorney within the two years before you transfer the relinquished property. Treas. Reg. §1.1031(k)-1(k) treats that person as a disqualified person. Prior 1031 intermediary services themselves are an exception to the agent test, which is how dedicated QI firms stay eligible.
What does a qualified intermediary cost?
Fees vary by firm and by exchange type. Ask about forward vs reverse vs improvement pricing, how funds are held, and wire procedures. Compare that to the tax on a failed exchange, not only to the lowest quote.
When should I hire the QI and the CPA?
Engage the CPA before you list, and engage the QI before the relinquished-property closing. Waiting until after you have the sale proceeds is how constructive-receipt problems start.
Talk it through with us
Bring the purchase history, depreciation schedules, entity chart, and any draft listing or purchase agreement. We will map the tax side and coordinate with your QI. We do not act as your QI. Book a complimentary consultation.
LaviCPA is a Los Angeles CPA firm for real estate investors. Shawn Lavi, CPA, is the firm's principal. Elias Lavi, CPA, is its founder and co-owner.