Certified Exchange Specialist (CES) — Questions and Answers

Question 1: A taxpayer closes the relinquished property on June 1. Their tax return (with extension) is due October 15. When does the exchange period end?

November 28 (180 days from June 1)
October 15 (the earlier date) (Correct answer)
June 1 of the following year
December 31 of the same year

Correct answer: October 15 (the earlier date)

The exchange period ends on the earlier of 180 days from closing or the tax return due date; October 15 is earlier than November 28.

Question 2: What should a CES professional advise a client who discovers their QI is using exchange funds for the QI's own business operations?

File Form 8824 early to protect the exchange
Continue the exchange since the QI will return the funds at closing
Immediately consult legal counsel, as this constitutes misuse of client funds and may jeopardize the exchange (Correct answer)
Ask the QI to provide a promissory note for the funds

Correct answer: Immediately consult legal counsel, as this constitutes misuse of client funds and may jeopardize the exchange

Commingling or misuse of exchange funds by a QI is a serious breach and potential fraud — the client must seek immediate legal counsel.

Question 3: What is the primary long-term estate planning advantage of a 1031 exchange strategy?

It guarantees elimination of all estate taxes
It converts ordinary income into capital gain income
It doubles the taxpayer's depreciation deductions
It allows accumulated deferred gains to be permanently wiped out via the stepped-up basis at death (Correct answer)

Correct answer: It allows accumulated deferred gains to be permanently wiped out via the stepped-up basis at death

The long-term estate planning power of 1031 exchanges lies in the ability to build wealth tax-deferred and ultimately receive a step-up in basis at death, permanently eliminating the deferred gain.

Question 4: A taxpayer has a realized gain of $200,000 and receives $75,000 in boot. How much gain must the taxpayer recognize?

$125,000
$200,000
$0
$75,000 (Correct answer)

Correct answer: $75,000

Recognized gain equals the lesser of boot received ($75,000) or realized gain ($200,000), so only $75,000 is recognized and $125,000 remains deferred.

Question 5: What happens to exchange funds if the QI becomes insolvent or goes bankrupt?

The IRS guarantees the funds up to $250,000
The exchange automatically converts to an installment sale
The taxpayer's exchange funds may be at risk unless properly protected in segregated or trust accounts (Correct answer)
A government escrow fund compensates the taxpayer within 30 days

Correct answer: The taxpayer's exchange funds may be at risk unless properly protected in segregated or trust accounts

If a QI becomes insolvent, exchange funds held in co-mingled accounts may be at risk — segregated accounts, bonds, and insurance provide protection.

Question 6: What is a key element of transaction processing?

Ignoring protocols
Unverified access
Transaction Processing best practice (Correct answer)
Irrelevant data

Correct answer: Transaction Processing best practice

A key element of transaction processing is adhering to best practices to ensure accuracy, security, and efficiency. This includes robust data validation, comprehensive error handling, and maintaining clear audit trails. Following these practices is crucial for preserving data integrity, meeting regulatory compliance, and building trust in financial systems.

Question 7: What is a key element of transaction processing?

Irrelevant data
Transaction Processing best practice (Correct answer)
Ignoring protocols
Unverified access

Correct answer: Transaction Processing best practice

Question 8: Which of the following is a key due diligence step an exchanger should take when selecting a QI?

Confirm the QI is a subsidiary of a national bank
Verify the QI carries fidelity bond and errors & omissions insurance (Correct answer)
Ensure the QI is a licensed real estate broker
Confirm the QI offers the lowest fee in the market

Correct answer: Verify the QI carries fidelity bond and errors & omissions insurance

A prudent exchanger should verify that the QI carries fidelity bond coverage and E&O insurance to protect against fraud or errors.

Question 9: What is a key element of risk management & security protocols?

Ignoring protocols
Risk Management & Security Protocols best practice (Correct answer)
Unverified access
Irrelevant data

Correct answer: Risk Management & Security Protocols best practice

Effective risk management and robust security protocols are essential for protecting assets and data. Following established best practices ensures that potential threats are identified, assessed, and mitigated systematically. This proactive approach helps organizations maintain compliance, prevent breaches, and safeguard sensitive information from various vulnerabilities.

Question 10: Which IRS Revenue Procedure provides the safe harbor guidelines for reverse and improvement exchanges?

Rev. Proc. 2010-14
Rev. Proc. 2000-37 (Correct answer)
Rev. Proc. 2017-51
Rev. Proc. 1990-12

Correct answer: Rev. Proc. 2000-37

Rev. Proc. 2000-37 provides the IRS safe harbor for reverse and improvement exchanges using Exchange Accommodation Titleholders.

Question 11: How many calendar days does a taxpayer have to identify replacement property after closing on the relinquished property?

180 days
60 days
45 days (Correct answer)
30 days

Correct answer: 45 days

The taxpayer has exactly 45 calendar days from the closing of the relinquished property to identify potential replacement properties.

Question 12: When a taxpayer eventually sells the replacement property in a taxable sale, which basis is used to calculate gain?

The fair market value at the time of the exchange
The substituted (carryover) basis from the relinquished property (Correct answer)
Zero, since the exchange deferred all gain
The purchase price of the replacement property

Correct answer: The substituted (carryover) basis from the relinquished property

The substituted basis from the 1031 exchange is used to calculate gain when the replacement property is ultimately sold in a taxable transaction.

Question 13: To fully defer capital gains tax in a 1031 exchange, the replacement property must have a value that is:

Equal to or greater than the relinquished property (Correct answer)
Equal to or less than the relinquished property
At least double the relinquished property value
Within 20% of the relinquished property value

Correct answer: Equal to or greater than the relinquished property

To fully defer gain, the taxpayer must acquire replacement property of equal or greater value and reinvest all net exchange proceeds.

Question 14: A taxpayer has an adjusted basis of $200,000 in the relinquished property and sells it for $500,000. What is the realized gain?

$300,000 (Correct answer)
$500,000
$200,000
$700,000

Correct answer: $300,000

Realized gain = $500,000 (amount realized) − $200,000 (adjusted basis) = $300,000.

Question 15: When does the IRS look at whether property was 'held for productive use in trade or business or for investment'?

Only at the time the exchange is initiated
Only when the taxpayer files a 1031 election with the IRS
Only when the replacement property is sold
At both the time of relinquishment and at the time of acquisition of the replacement property (Correct answer)

Correct answer: At both the time of relinquishment and at the time of acquisition of the replacement property

Both the relinquished and replacement properties must be held for qualifying purposes at the time of each respective transfer.

Question 16: What is a key element of client communication?

Irrelevant data
Client Communication best practice (Correct answer)
Ignoring protocols
Unverified access

Correct answer: Client Communication best practice

Effective client communication is vital for building trust, managing expectations, and ensuring client satisfaction. Adhering to best practices, such as clarity, transparency, responsiveness, and active listening, fosters strong relationships. These practices help prevent misunderstandings, resolve issues efficiently, and maintain a positive professional image.

Question 17: What is a key element of client communication?

Client Communication best practice (Correct answer)
Irrelevant data
Unverified access
Ignoring protocols

Correct answer: Client Communication best practice

Question 18: How long does the IRS allow for a reverse exchange safe harbor period under Rev. Proc. 2000-37?

45 days
90 days
180 days (Correct answer)
365 days

Correct answer: 180 days

Under Rev. Proc. 2000-37, the safe harbor for reverse exchanges requires the EAT to transfer the parked property within 180 days.

Question 19: What is a key element of client communication?

Unverified access
Client Communication best practice (Correct answer)
Ignoring protocols
Irrelevant data

Correct answer: Client Communication best practice

Question 20: A taxpayer's realized gain is zero (no economic gain), yet the taxpayer receives $30,000 in cash boot. How much gain is recognized?

$30,000 less the taxpayer's adjusted basis
$0, because recognized gain cannot exceed realized gain (Correct answer)
$15,000, representing 50% of the boot received
$30,000, equal to the boot received

Correct answer: $0, because recognized gain cannot exceed realized gain

Recognized gain is limited to the lesser of boot received or realized gain; since realized gain is $0, no gain is recognized even though boot was received.

Question 21: Which of the following is considered 'exchange expenses' that reduce boot in a 1031 exchange?

Hazard insurance premiums
Loan origination fees
Property management fees
Qualified intermediary fees (Correct answer)

Correct answer: Qualified intermediary fees

Qualified intermediary fees are exchange expenses that can reduce the amount of taxable boot received.

Question 22: What is a key element of risk management & security protocols?

Risk Management & Security Protocols best practice (Correct answer)
Unverified access
Irrelevant data
Ignoring protocols

Correct answer: Risk Management & Security Protocols best practice

Question 23: Can US real property be exchanged for foreign real property in a 1031 exchange?

Yes, as long as the exchange value is equal
Yes, if both properties are investment properties
No, only commercial properties qualify
No, US real property and foreign real property are not like-kind (Correct answer)

Correct answer: No, US real property and foreign real property are not like-kind

Since the Tax Cuts and Jobs Act of 2017, US real property and foreign real property are not considered like-kind.

Question 24: Under Rev. Proc. 2008-16, a dwelling unit acquired in a 1031 exchange qualifies for personal use conversion if it has been held for at least how long?

12 months
36 months
24 months (Correct answer)
6 months

Correct answer: 24 months

Rev. Proc. 2008-16 provides a safe harbor where a dwelling unit must be held for at least 24 months after the exchange before converting to personal use.

Question 25: What impact does a 1031 exchange have on the taxpayer's future depreciation deductions?

Depreciation restarts fresh at the replacement property's full purchase price
Depreciation is eliminated on the replacement property for 5 years
Depreciation is suspended during the exchange period
Depreciation continues based on the carryover adjusted basis, which is lower than fair market value (Correct answer)

Correct answer: Depreciation continues based on the carryover adjusted basis, which is lower than fair market value

Because the basis carries over (substituted basis), the depreciation deductions on the replacement property are based on a lower adjusted basis than the current fair market value.

Question 26: What is a '1031 exchange accommodation titleholder agreement' (QEAA) and when is it required?

A QEAA is an IRS pre-clearance form for complex exchanges
A QEAA is the exchange agreement between the taxpayer and the QI
A QEAA is the written agreement between the taxpayer and EAT required for reverse and improvement exchange safe harbors (Correct answer)
A QEAA is required for all delayed exchanges over $500,000

Correct answer: A QEAA is the written agreement between the taxpayer and EAT required for reverse and improvement exchange safe harbors

Under Rev. Proc. 2000-37, a QEAA is the written agreement establishing the EAT arrangement in reverse and improvement exchanges.

Question 27: If a taxpayer receives furniture and appliances (personal property) as part of an otherwise qualifying real estate exchange, how is that personal property treated?

As qualifying like-kind property with no tax consequence
As boot subject to gain recognition equal to its fair market value (Correct answer)
As a tax-free gift excluded from the exchange calculation
As a suspended item deferred until the replacement property is sold

Correct answer: As boot subject to gain recognition equal to its fair market value

Non-like-kind personal property received constitutes boot, and its fair market value is included in boot subject to gain recognition under IRC §1031.

Question 28: Must replacement property identification be submitted in writing to qualify under IRC 1031?

No, oral notification to the QI is sufficient
Yes, but only if the property value exceeds $1 million
No, listing on the exchange agreement at closing is sufficient
Yes, identification must be in writing and signed by the taxpayer (Correct answer)

Correct answer: Yes, identification must be in writing and signed by the taxpayer

Treasury Regulations require that replacement property be identified in a written document signed by the taxpayer and delivered to the QI or another qualified party.

Question 29: Can a taxpayer extend the 45-day identification period for any reason?

Yes, if a natural disaster has been federally declared (Correct answer)
No, extensions are never granted under any circumstances
Yes, if the replacement property is located out of state
Yes, with written consent from the QI

Correct answer: Yes, if a natural disaster has been federally declared

The IRS may extend the 45-day identification period in cases of presidentially declared disasters, but not for ordinary circumstances.

Question 30: Can a taxpayer exchange one property for multiple replacement properties in a 1031 exchange?

No, only one-to-one exchanges are permitted
No, unless the QI specifically approves it
Yes, but only if the replacement properties are in the same state
Yes, as long as identification rules are followed (Correct answer)

Correct answer: Yes, as long as identification rules are followed

A taxpayer may acquire multiple replacement properties as long as the identification and acquisition rules under IRC 1031 are properly followed.

Question 31: A taxpayer relinquishes a duplex held for rental income and wishes to acquire a single-family home as a rental. Is this a valid like-kind exchange?

No, because the property types are too different
Yes, because both are real property held for investment (Correct answer)
No, because duplexes and single-family homes have different uses
Yes, but only if values are identical

Correct answer: Yes, because both are real property held for investment

Both a duplex and a single-family rental home are real property held for investment, making them like-kind.

Question 32: What is 'realized gain' in the context of a 1031 exchange?

The capital gain tax owed on the transaction
The amount of depreciation taken on the relinquished property
The fair market value of the replacement property
The difference between the amount realized on the sale and the adjusted basis of the relinquished property (Correct answer)

Correct answer: The difference between the amount realized on the sale and the adjusted basis of the relinquished property

Realized gain is computed as the amount realized minus the adjusted basis of the relinquished property.

Question 33: How does a 1031 exchange affect state income tax in states that do not conform to federal 1031 rules?

State taxes are waived for exchanges completed within the state
States must follow federal law on 1031 exchanges
The taxpayer may owe state capital gains tax even if federal gain is deferred (Correct answer)
State taxes are always automatically deferred in a 1031 exchange

Correct answer: The taxpayer may owe state capital gains tax even if federal gain is deferred

Some states do not conform to federal 1031 exchange rules, meaning state capital gains tax may be due even when the federal gain is fully deferred.

Question 34: When does the 45-day identification period begin?

On the date the purchase agreement for replacement property is signed
On the date the relinquished property is transferred to the buyer (Correct answer)
On the date the exchange agreement is signed with the QI
On the date the taxpayer receives the QI's wire

Correct answer: On the date the relinquished property is transferred to the buyer

The 45-day identification period begins on the date of the actual transfer (closing) of the relinquished property.

Question 35: What is a key element of risk management & security protocols?

Ignoring protocols
Risk Management & Security Protocols best practice (Correct answer)
Irrelevant data
Unverified access

Correct answer: Risk Management & Security Protocols best practice

Question 36: A CES professional is advising a client who wishes to exchange out of active rental property into a DST. What key risk should they disclose about DST investments?

DST income is taxed at ordinary income rates regardless of property type
DSTs require a minimum 10-year holding period
DSTs are illiquid, passive investments with no ability for the investor to manage or refinance the property (Correct answer)
DST interests do not qualify as like-kind replacement property

Correct answer: DSTs are illiquid, passive investments with no ability for the investor to manage or refinance the property

DST investments are highly illiquid and passive — investors have no management control, and refinancing or selling the property requires unanimous consent.

Question 37: Can a taxpayer revoke or change a replacement property identification after the 45-day period has passed?

Yes, if the QI provides written approval
No, identifications cannot be changed after the 45-day deadline (Correct answer)
Yes, if an IRS form is filed within 10 days
Yes, changes are allowed up to the 90th day

Correct answer: No, identifications cannot be changed after the 45-day deadline

Once the 45-day identification period has expired, the taxpayer cannot change or revoke the identification.

Question 38: Which of the following is a violation of exchange rules?

Following market news
Front running trades (Correct answer)
Placing legal bids
Using brokerage tools

Correct answer: Front running trades

Front running trades is a serious violation of exchange rules, where a broker or trader executes orders on a security for their own account with prior knowledge of a pending client order. This allows them to profit from the anticipated price movement before the client's order is executed. It is an unethical and illegal practice that exploits client information.

Question 39: What happens if a taxpayer's tax return due date (including extensions) falls before the 180th day of the exchange period?

The taxpayer must file for a special IRS extension
The exchange period ends on the tax return due date, whichever is earlier (Correct answer)
The exchange period is automatically extended to 180 days
The 180-day period always controls

Correct answer: The exchange period ends on the tax return due date, whichever is earlier

The exchange period ends on the earlier of 180 days after the relinquished property closing or the due date of the taxpayer's tax return (including extensions).

Question 40: What is a key element of transaction processing?

Transaction Processing best practice (Correct answer)
Ignoring protocols
Unverified access
Irrelevant data

Correct answer: Transaction Processing best practice

Question 41: Where must the QI hold 1031 exchange proceeds?

In a federally insured savings account in the QI's name
In a co-mingled company operating account
In a segregated, separate account, trust, or escrow for each exchanger (Correct answer)
In the taxpayer's personal escrow account

Correct answer: In a segregated, separate account, trust, or escrow for each exchanger

Best practices and many state regulations require QIs to hold funds in separate, segregated accounts for each exchanger to protect client funds.

Question 42: Which tax rate applies to unrecaptured Section 1250 depreciation when it becomes taxable?

15%
37%
0%
25% (Correct answer)

Correct answer: 25%

Unrecaptured Section 1250 depreciation is taxed at a maximum rate of 25% when recognized.

Question 43: What term is used to describe property given up by the taxpayer in a 1031 exchange?

Replacement property
Exchange property
Boot property
Relinquished property (Correct answer)

Correct answer: Relinquished property

The property given up by the taxpayer is called the relinquished property.

Question 44: A taxpayer wants to exchange a ranch used for business purposes for an apartment complex held for investment. Is this a valid like-kind exchange?

No, because the properties have different uses
Yes, because both are US real property held for business or investment (Correct answer)
No, because ranch land and apartments are different property types
Yes, but only if both properties have the same square footage

Correct answer: Yes, because both are US real property held for business or investment

Real property exchanged for real property qualifies as like-kind regardless of the specific use, as long as both are held for business or investment.

Question 45: How many calendar days does a taxpayer have to close on replacement property after transferring the relinquished property?

180 days (Correct answer)
90 days
365 days
45 days

Correct answer: 180 days

The exchange period is 180 calendar days from the date of transfer of the relinquished property.

Question 46: Which of the following best describes an 'installment sale' combined with a 1031 exchange?

An installment sale eliminates the need for a QI
An installment sale always disqualifies a 1031 exchange
An installment sale and 1031 exchange cannot be used in the same transaction
A 1031 exchange can defer gain on proceeds received at closing, while installment payments received later may be partially taxable (Correct answer)

Correct answer: A 1031 exchange can defer gain on proceeds received at closing, while installment payments received later may be partially taxable

Exchange proceeds received at closing are deferred via the 1031 exchange, but subsequent installment payments received from the buyer may be subject to tax as they are received.

Question 47: The amount of gain recognized in a partially tax-deferred 1031 exchange equals:

The total realized gain on the relinquished property
The lesser of the boot received or the total realized gain (Correct answer)
Zero, because all gain is always deferred
The greater of the boot received or the total realized gain

Correct answer: The lesser of the boot received or the total realized gain

Recognized gain is capped at the lesser of the boot received or total realized gain, ensuring a taxpayer cannot recognize more than was actually gained.

Question 48: What is an 'exchange-first' strategy in a 1031 exchange involving a partial 1031 and partial installment sale?

The taxpayer takes installment payments first, then uses the 1031 exchange for remaining proceeds
The taxpayer completes the 1031 exchange before receiving any installment payments (Correct answer)
The QI receives installment payments on behalf of the taxpayer
The taxpayer exchanges the installment note for like-kind property

Correct answer: The taxpayer completes the 1031 exchange before receiving any installment payments

In an exchange-first strategy, all proceeds possible are directed into the 1031 exchange, with the installment note handled separately to manage taxable portions.

Question 49: What is a key element of transaction processing?

Ignoring protocols
Irrelevant data
Unverified access
Transaction Processing best practice (Correct answer)

Correct answer: Transaction Processing best practice

Question 50: Which of the following would be considered like-kind to an office building in a 1031 exchange?

A hotel property held for investment (Correct answer)
Corporate stock in a real estate trust
An interest in a real estate partnership
A promissory note secured by real estate

Correct answer: A hotel property held for investment

A hotel held for investment is real property and is like-kind to an office building, regardless of use.

Question 51: Which of the following property types qualifies as like-kind in a 1031 exchange?

Stock in a real estate company
A leasehold interest of 30 or more years (Correct answer)
Inventory held by a dealer
A primary residence upgraded for resale

Correct answer: A leasehold interest of 30 or more years

A leasehold interest with 30 or more years remaining (including renewal options) is considered like-kind to a fee simple interest.

Question 52: If a taxpayer closes on the relinquished property on March 1, what is the last day to identify replacement property?

April 14
April 15 (Correct answer)
April 30
March 31

Correct answer: April 15

Counting 45 calendar days from March 1, the identification deadline falls on April 15.

Question 53: What is a 'parking arrangement' in the context of a reverse or improvement exchange?

The taxpayer parks the proceeds in a retirement account
The replacement property is listed for sale while exchange proceeds are held
The QI parks exchange funds in a money market account
The EAT temporarily holds title to one of the properties to facilitate the exchange (Correct answer)

Correct answer: The EAT temporarily holds title to one of the properties to facilitate the exchange

A parking arrangement refers to the EAT taking temporary title to either the replacement or relinquished property to allow the exchange structure to work.

Question 54: The QI's exchange agreement must be in place before what event to properly structure the exchange?

Before the end of the tax year
Before the taxpayer signs the listing agreement for the relinquished property
Before the taxpayer closes on the relinquished property (Correct answer)
Before the replacement property is identified

Correct answer: Before the taxpayer closes on the relinquished property

The exchange agreement must be executed before the closing of the relinquished property to prevent constructive receipt of the proceeds.

Question 55: What distinguishes a 'reverse exchange' from a standard delayed 1031 exchange?

In a reverse exchange, the taxpayer acquires the replacement property before selling the relinquished property (Correct answer)
In a reverse exchange, no QI is needed
In a reverse exchange, there are no identification or deadline requirements
In a reverse exchange, the exchange is tax-free permanently

Correct answer: In a reverse exchange, the taxpayer acquires the replacement property before selling the relinquished property

A reverse exchange allows the taxpayer to acquire the replacement property first and then sell the relinquished property, with an EAT parking one of the properties.

Question 56: Which IRS form is used by a taxpayer to report a like-kind exchange?

Schedule D
Form 8824 (Correct answer)
Form 4797
Form 1099-S

Correct answer: Form 8824

Form 8824 (Like-Kind Exchanges) is filed with the taxpayer's return to report a 1031 exchange.

Question 57: What is a key element of client communication?

Client Communication best practice (Correct answer)
Ignoring protocols
Unverified access
Irrelevant data

Correct answer: Client Communication best practice

Question 58: A taxpayer can eliminate mortgage boot arising from reduced debt on replacement property by:

Splitting the transaction into two separate like-kind exchanges
Adding cash to the exchange or acquiring replacement property with equal or greater debt (Correct answer)
Paying down the relinquished property's mortgage before listing the property
Requesting a waiver from the IRS by filing Form 8824 with an explanation

Correct answer: Adding cash to the exchange or acquiring replacement property with equal or greater debt

Mortgage boot is neutralized when the taxpayer either contributes additional cash to the exchange or assumes debt on replacement property equal to or exceeding the debt relieved.

Question 59: What is a Delaware Statutory Trust (DST) and why is it used as replacement property in 1031 exchanges?

A DST is a short-term government trust used for parking exchange funds
A DST is a legal entity that replaces the QI in complex exchanges
A DST is a trust structure that holds real property and issues beneficial interests that qualify as like-kind replacement property (Correct answer)
A DST is a mutual fund that invests in real estate investment trusts

Correct answer: A DST is a trust structure that holds real property and issues beneficial interests that qualify as like-kind replacement property

A DST holds real property and issues beneficial interests to investors; under IRS Rev. Rul. 2004-86, these interests qualify as like-kind replacement property.

Question 60: What is the 'drop and swap' strategy in a 1031 exchange partnership context?

A strategy where the QI drops the exchange if values don't match and swaps deadlines
Partners receive their interest as tenants-in-common before the exchange so each can independently participate or cash out (Correct answer)
A strategy where the partnership drops out of an exchange and swaps to a REIT
A method to swap one QI for another mid-exchange

Correct answer: Partners receive their interest as tenants-in-common before the exchange so each can independently participate or cash out

In a drop and swap, partnership interests are converted to TIC interests before the exchange, allowing some partners to cash out and others to do a 1031 exchange independently.

Question 61: In a simultaneous exchange, how does the QI coordinate the transfer of funds and deeds?

The QI acquires title to both properties before transferring them
The QI transfers funds only after both deeds are recorded
The QI holds both properties for 45 days before transferring
The QI coordinates closing so that the relinquished and replacement property transfers happen on the same day (Correct answer)

Correct answer: The QI coordinates closing so that the relinquished and replacement property transfers happen on the same day

In a simultaneous exchange, the QI coordinates closings so both the relinquished and replacement properties transfer on the same day.

Question 62: Why is it critical for the QI to be identified and engaged BEFORE the relinquished property is listed for sale?

To avoid paying capital gains on the listing period
To allow the QI to negotiate the sale price
To ensure the exchange agreement is in place before any binding obligation to transfer arises (Correct answer)
To establish the replacement property identification before listing

Correct answer: To ensure the exchange agreement is in place before any binding obligation to transfer arises

The exchange agreement and assignment must be structured before the taxpayer enters a binding obligation to sell — ideally before or at listing.

Question 63: Under the three-property rule, how many potential replacement properties may a taxpayer identify?

An unlimited number if values are disclosed
Up to five properties of equal value
Up to two properties
Up to three properties regardless of value (Correct answer)

Correct answer: Up to three properties regardless of value

The three-property rule allows identification of up to three replacement properties regardless of their combined fair market value.

Question 64: What is a key element of client communication?

Unverified access
Irrelevant data
Client Communication best practice (Correct answer)
Ignoring protocols

Correct answer: Client Communication best practice

Question 65: Under IRC Section 1031, which of the following best defines 'like-kind' property in a US exchange?

Property that is identical in use and location
Property owned for at least five years
Property with the same fair market value
Property of the same nature or character, regardless of grade or quality (Correct answer)

Correct answer: Property of the same nature or character, regardless of grade or quality

Like-kind refers to the nature or character of the property, not its grade, quality, or specific use.

Question 66: What is the role of the FINRA in the exchange market?

Audit health agencies
Regulate brokers and ensure market fairness (Correct answer)
Promote IPOs
Issue tax refunds

Correct answer: Regulate brokers and ensure market fairness

The Financial Industry Regulatory Authority (FINRA) plays a crucial role in the exchange market by regulating brokerage firms and their registered representatives. Its purpose is to protect investors and ensure market fairness by writing and enforcing rules governing broker conduct. FINRA helps maintain the integrity and transparency of the U.S. securities industry.

Question 67: A taxpayer exchanges a property worth $500,000 for a replacement property worth $450,000 and receives $50,000 in cash. How is the $50,000 treated?

It is deferred to the next exchange
It is treated as boot and is taxable (Correct answer)
It is tax-free as part of the exchange
It reduces the basis of the replacement property only

Correct answer: It is treated as boot and is taxable

The $50,000 in cash received is boot and is taxable to the extent of the taxpayer's realized gain.

Question 68: Under the boot netting rules, which of the following can directly offset mortgage boot?

The qualified intermediary's escrow fee
Depreciation allowed on replacement property after acquisition
Cash received by the taxpayer from the qualified intermediary
Cash added by the taxpayer into the exchange (Correct answer)

Correct answer: Cash added by the taxpayer into the exchange

Cash contributed by the taxpayer to complete the exchange directly offsets mortgage boot, reducing net boot and the amount of gain recognized.

Question 69: What is a key element of client communication?

Unverified access
Ignoring protocols
Irrelevant data
Client Communication best practice (Correct answer)

Correct answer: Client Communication best practice

Question 70: What document does the QI use to acquire the rights to the relinquished property without taking title?

A trust deed
An assignment agreement (Correct answer)
A deed of reconveyance
A purchase option agreement

Correct answer: An assignment agreement

The QI uses an assignment of the taxpayer's rights under the sale contract to step into the exchange without taking title to the property.

Question 71: In a 1031 exchange, what does 'boot' refer to?

The qualified intermediary's fee
The fair market value of the relinquished property
The down payment on the replacement property
Any unlike property or cash received in the exchange (Correct answer)

Correct answer: Any unlike property or cash received in the exchange

Boot is any unlike property or cash received in the exchange, which is taxable to the extent of gain.

Question 72: In a reverse exchange, which property does the Exchange Accommodation Titleholder (EAT) hold?

The relinquished property only
The QI's escrow account
The taxpayer's personal property as collateral
Either the relinquished or replacement property, depending on the structure (Correct answer)

Correct answer: Either the relinquished or replacement property, depending on the structure

In a reverse exchange, the EAT can hold either the replacement property (park-and-sell) or the relinquished property (buy-first), depending on which structure is used.

Question 73: Which of the following best describes the 'net boot' concept used in gain recognition calculations?

Cash received plus personal property received, without reduction for any costs
Boot received minus allowable exchange expenses and any boot paid by the taxpayer (Correct answer)
Mortgage assumed on replacement property minus mortgage relieved on relinquished property
Total FMV of all property received minus total FMV of all property relinquished

Correct answer: Boot received minus allowable exchange expenses and any boot paid by the taxpayer

Net boot is computed by reducing gross boot received by exchange expenses paid and any boot the taxpayer contributes, yielding the net amount subject to gain recognition.

Question 74: What is the primary role of a Qualified Intermediary (QI) in a 1031 exchange?

To provide legal advice to the taxpayer
To negotiate the purchase price of the replacement property
To hold exchange proceeds and facilitate the exchange to avoid actual or constructive receipt by the taxpayer (Correct answer)
To appraise the relinquished and replacement properties

Correct answer: To hold exchange proceeds and facilitate the exchange to avoid actual or constructive receipt by the taxpayer

The QI holds the exchange proceeds and acts as the intermediary to ensure the taxpayer does not have actual or constructive receipt of the funds.

Question 75: A taxpayer wants to use exchange proceeds to purchase a vacation home that they will occasionally use personally. Is this a qualifying replacement property?

Yes, any real property qualifies
Yes, if the property is rented for at least 60 days per year
No, property used personally does not qualify unless it meets the investment use test (Correct answer)
No, vacation homes are permanently excluded from 1031 exchanges

Correct answer: No, property used personally does not qualify unless it meets the investment use test

A vacation home must meet specific requirements (held for investment, rented at fair market value, limited personal use) to qualify — personal use alone disqualifies it.

Question 76: What is a key element of risk management & security protocols?

Risk Management & Security Protocols best practice (Correct answer)
Ignoring protocols
Irrelevant data
Unverified access

Correct answer: Risk Management & Security Protocols best practice

Question 77: What is a key element of risk management & security protocols?

Ignoring protocols
Unverified access
Irrelevant data
Risk Management & Security Protocols best practice (Correct answer)

Correct answer: Risk Management & Security Protocols best practice

Question 78: Which statement about personal property and 1031 exchanges after the Tax Cuts and Jobs Act of 2017 is correct?

Personal property still qualifies for 1031 exchanges
Personal property exchanges require IRS pre-approval
Personal property was eliminated from 1031 exchange eligibility (Correct answer)
Only vehicles qualify as personal property in 1031 exchanges

Correct answer: Personal property was eliminated from 1031 exchange eligibility

The TCJA eliminated personal property from 1031 exchange eligibility, limiting it to real property only.

Question 79: If a taxpayer's 180th day falls on a Sunday, when must the exchange close?

The preceding Friday
The Sunday itself (no extension) (Correct answer)
The following Monday
The next business day after the Sunday

Correct answer: The Sunday itself (no extension)

The 180-day deadline is absolute — it does not shift for weekends or holidays, and the exchange must close by that date.

Question 80: What is the net investment income tax (NIIT) rate that may apply to gain recognized in a failed 1031 exchange for high-income taxpayers?

0.9%
5.0%
3.8% (Correct answer)
2.9%

Correct answer: 3.8%

The NIIT is 3.8% and may apply to net investment income, including gain from the sale of investment property, for taxpayers above the income threshold.

Question 81: Which identification rule allows a taxpayer to identify any number of replacement properties as long as their combined fair market value does not exceed 200% of the relinquished property's FMV?

95% rule
Unlimited property rule
200% rule (Correct answer)
Three-property rule

Correct answer: 200% rule

The 200% rule allows identification of any number of properties as long as their aggregate FMV does not exceed 200% of the relinquished property's FMV.

Question 82: What is the significance of the 'safe harbor' provisions in the Treasury Regulations for QIs?

They allow the taxpayer to use a QI without triggering constructive receipt, as long as specific conditions are met (Correct answer)
They allow the QI to take title to exchange properties without tax consequence
They permit the QI to invest exchange funds in equities
They eliminate the need for a written exchange agreement

Correct answer: They allow the taxpayer to use a QI without triggering constructive receipt, as long as specific conditions are met

The safe harbor provisions under Treas. Reg. §1.1031(k)-1 establish conditions under which using a QI does not result in constructive receipt by the taxpayer.

Question 83: What is an 'improvement exchange' (also called a build-to-suit or construction exchange)?

An exchange where the replacement property is improved using exchange funds held by the EAT before being transferred to the taxpayer (Correct answer)
An exchange where the taxpayer builds a new property on relinquished land
An exchange structure that allows exchange of raw land only
An exchange where improvements are made to the relinquished property before sale

Correct answer: An exchange where the replacement property is improved using exchange funds held by the EAT before being transferred to the taxpayer

In an improvement exchange, the EAT holds the replacement property while improvements are made using exchange proceeds, then transfers the improved property to the taxpayer within 180 days.

Question 84: What is the QI's responsibility when it receives the relinquished property proceeds at closing?

Invest the funds in short-term securities to generate interest
Hold the funds until the IRS confirms the exchange
Transfer the funds back to the taxpayer for safekeeping
Hold the funds in a secure account and use them solely to acquire the replacement property (Correct answer)

Correct answer: Hold the funds in a secure account and use them solely to acquire the replacement property

The QI must hold the exchange proceeds and use them exclusively for acquiring the replacement property as directed by the exchange agreement.

Question 85: What is a key element of risk management & security protocols?

Irrelevant data
Unverified access
Risk Management & Security Protocols best practice (Correct answer)
Ignoring protocols

Correct answer: Risk Management & Security Protocols best practice

Question 86: Which of the following would NOT constitute boot in a 1031 exchange?

Personal property worth $5,000 received from the buyer
Net mortgage relief of $50,000 from reduced debt on replacement property
An additional parcel of qualifying like-kind real estate received from the buyer (Correct answer)
$10,000 in cash disbursed to the taxpayer at closing

Correct answer: An additional parcel of qualifying like-kind real estate received from the buyer

Like-kind real property received as part of the exchange is not boot; it qualifies for full tax deferral alongside the primary replacement property.

Question 87: What is a 'direct deeding' arrangement and why is it used in 1031 exchanges?

Direct deeding eliminates the need for a QI
The QI takes title to both properties and deeds them to the buyer and taxpayer respectively
The taxpayer deeds both properties to the QI for safekeeping
Property deeds transfer directly between buyer and seller without the QI taking title, while the QI handles funds and assignments (Correct answer)

Correct answer: Property deeds transfer directly between buyer and seller without the QI taking title, while the QI handles funds and assignments

Direct deeding allows deeds to pass directly between parties while the QI uses assignment of contract rights to facilitate the exchange without taking title.

Question 88: What is insider trading?

Trading only on weekends
Investing based on media reports
Selling undervalued stocks
Using confidential info for trading advantage (Correct answer)

Correct answer: Using confidential info for trading advantage

Insider trading is the illegal practice of using confidential, non-public information about a company to make personal trading decisions for financial gain. This practice gives an unfair advantage over other investors and undermines the fairness and integrity of the securities markets. It is strictly prohibited by regulatory bodies like the SEC.

Question 89: What must the exchange agreement between the taxpayer and QI restrict to prevent constructive receipt?

The taxpayer's ability to select replacement property
The taxpayer's access to exchange funds except upon completion of the exchange, exchange failure, or expiration of the exchange period (Correct answer)
The taxpayer's right to file Form 8824
The QI's ability to invest exchange funds

Correct answer: The taxpayer's access to exchange funds except upon completion of the exchange, exchange failure, or expiration of the exchange period

The exchange agreement must limit the taxpayer's access to proceeds to specific triggering events that do not compromise the exchange.

Question 90: What is depreciation recapture, and how does it affect a 1031 exchange?

Depreciation recapture is eliminated in a 1031 exchange
Depreciation recapture must be paid in full before the exchange can proceed
Depreciation recapture only applies to residential rental properties
Depreciation recapture is deferred along with the capital gain in a successful 1031 exchange (Correct answer)

Correct answer: Depreciation recapture is deferred along with the capital gain in a successful 1031 exchange

In a successful 1031 exchange, depreciation recapture (taxed at 25%) is also deferred along with the capital gain.

Question 91: What is a 'tenant-in-common' (TIC) interest and how can it be used in a 1031 exchange?

TIC interests can only be used in improvement exchanges
A TIC interest represents sole ownership — it cannot be used in a 1031 exchange
A TIC interest is an undivided fractional interest in real property that qualifies as like-kind replacement property (Correct answer)
A TIC interest is a debt instrument secured by real property

Correct answer: A TIC interest is an undivided fractional interest in real property that qualifies as like-kind replacement property

A tenant-in-common interest is an undivided fractional ownership in real property and qualifies as like-kind replacement property in a 1031 exchange.

Question 92: What is the purpose of anti-money laundering (AML) regulations?

To prevent illegal financial transactions (Correct answer)
To enhance investor relations
To simplify audits
To manage accounting errors

Correct answer: To prevent illegal financial transactions

Anti-money laundering (AML) regulations are designed to prevent illegal financial transactions by making it difficult for criminals to disguise illicitly obtained funds as legitimate income. Financial institutions are mandated to implement procedures to detect and report suspicious activities. This helps combat serious financial crimes like terrorism financing and drug trafficking.

Question 93: What is a key element of risk management & security protocols?

Risk Management & Security Protocols best practice (Correct answer)
Ignoring protocols
Unverified access
Irrelevant data

Correct answer: Risk Management & Security Protocols best practice

Question 94: What is an 'umbrella partnership REIT' (UPREIT) and how does it relate to 1031 exchanges?

An UPREIT allows property owners to contribute property in exchange for operating partnership units, which is an alternative to a 1031 exchange (Correct answer)
An UPREIT is a government-approved exchange structure for commercial properties only
An UPREIT is a type of QI used for large institutional exchanges
An UPREIT is a Delaware Statutory Trust that qualifies as replacement property

Correct answer: An UPREIT allows property owners to contribute property in exchange for operating partnership units, which is an alternative to a 1031 exchange

An UPREIT allows property owners to contribute property to a REIT's operating partnership in exchange for OP units — while not a 1031 exchange itself, it is a related tax-deferral strategy.

Question 95: What is a key element of risk management & security protocols?

Unverified access
Irrelevant data
Risk Management & Security Protocols best practice (Correct answer)
Ignoring protocols

Correct answer: Risk Management & Security Protocols best practice

Question 96: Which type of exchange involves two parties directly trading properties with each other?

Simultaneous exchange
Two-party direct exchange (Correct answer)
Delayed exchange
Improvement exchange

Correct answer: Two-party direct exchange

A two-party direct exchange (also called a swap) involves two taxpayers directly exchanging their properties with each other.

Question 97: What is the primary distinguishing factor between investment property and dealer property for 1031 exchange purposes?

The intent of the taxpayer at the time of purchase and sale (Correct answer)
Whether the property is financed or owned free and clear
The dollar value of the property
The number of years the property was owned

Correct answer: The intent of the taxpayer at the time of purchase and sale

The taxpayer's intent — whether the property is held for investment or for sale — is the primary factor distinguishing qualifying from disqualifying property.

Question 98: What is a key element of transaction processing?

Irrelevant data
Unverified access
Ignoring protocols
Transaction Processing best practice (Correct answer)

Correct answer: Transaction Processing best practice

Question 99: Can a QI provide legal or tax advice to the taxpayer as part of their exchange services?

No, QIs should refer taxpayers to their own independent legal and tax advisors (Correct answer)
Yes, QIs are required to provide tax guidance
Yes, if the QI employs a licensed CPA
Yes, for exchanges under $1 million in value

Correct answer: No, QIs should refer taxpayers to their own independent legal and tax advisors

QIs are not tax or legal advisors; they should always refer taxpayers to independent qualified professionals for tax and legal guidance.

Question 100: Which of the following is NOT eligible as like-kind property in a 1031 exchange?

Rental residential property
A vacant lot held for investment
A commercial office building
A primary residence (Correct answer)

Correct answer: A primary residence

A primary residence is not held for business or investment purposes and does not qualify for a 1031 exchange.

Question 101: If a taxpayer exchanges into a replacement property of lesser value and receives $50,000 in cash, which portion is taxable?

The lesser of the boot received ($50,000) or the realized gain (Correct answer)
The full $50,000 regardless of realized gain
Only 50% of the $50,000
Nothing — the exchange defers all tax

Correct answer: The lesser of the boot received ($50,000) or the realized gain

The recognized gain is the lesser of the boot received or the total realized gain on the transaction.

Question 102: What is a key element of client communication?

Irrelevant data
Ignoring protocols
Unverified access
Client Communication best practice (Correct answer)

Correct answer: Client Communication best practice

Question 103: What is the consequence of failing to identify replacement property within the 45-day window?

The exchange period is reduced to 90 days
The taxpayer can substitute identified property with any real estate
Only a 10% penalty applies to the gain
The entire exchange fails and proceeds become taxable (Correct answer)

Correct answer: The entire exchange fails and proceeds become taxable

Failure to timely identify replacement property results in a failed exchange, making all deferred gain immediately taxable.

Question 104: A taxpayer sells unencumbered property for $600,000 (adjusted basis $200,000) and acquires replacement property worth $600,000 by assuming a $200,000 mortgage and using $400,000 in exchange funds. What is the recognized gain?

$200,000, equal to the mortgage assumed
$0, because full value was reinvested with no cash back (Correct answer)
$400,000, equal to the cash portion of the transaction
$600,000, equal to the total sale price

Correct answer: $0, because full value was reinvested with no cash back

All $600,000 in proceeds were fully reinvested (via $400,000 exchange funds plus $200,000 in assumed debt), no boot was received, and therefore no gain is recognized.

Question 105: What is the consequence if the taxpayer does not close on any identified replacement property within the 180-day exchange period?

The taxpayer may apply the funds to a future exchange
The QI holds the funds for an additional 45 days
A 5% penalty is assessed but gain deferral continues
The exchange fails and the proceeds are returned to the taxpayer as taxable income (Correct answer)

Correct answer: The exchange fails and the proceeds are returned to the taxpayer as taxable income

Failure to close on replacement property within 180 days results in a failed exchange and the proceeds are treated as taxable.

Question 106: When a taxpayer pays cash boot to the other party (rather than receiving it), the tax consequence to the paying taxpayer is:

No boot is received by the paying taxpayer, so no gain is triggered by that cash (Correct answer)
The cash paid permanently reduces the taxpayer's realized gain on future dispositions
The cash paid is deductible as an exchange expense reducing taxable income
The cash paid creates a tax credit equal to the capital gains rate times the amount paid

Correct answer: No boot is received by the paying taxpayer, so no gain is triggered by that cash

Boot taxation applies only to boot received; a taxpayer who pays cash into the exchange receives no boot from that payment and therefore triggers no additional gain recognition.

Question 107: Which of the following would disqualify a property from a 1031 exchange because it is 'held primarily for sale'?

Farmland rented to agricultural operators
A commercial warehouse leased to tenants
A house flipped by a dealer after 90 days (Correct answer)
A storage facility held for five years

Correct answer: A house flipped by a dealer after 90 days

Property held primarily for sale, such as dealer property that is quickly flipped, does not qualify for 1031 exchange treatment.

Question 108: Which of the following would create 'mortgage boot' in a 1031 exchange?

Paying off the mortgage before the exchange
Acquiring a replacement property with a lower mortgage than the relinquished property (Correct answer)
Acquiring a replacement property with a higher mortgage than the relinquished property
Using all-cash to acquire the replacement property

Correct answer: Acquiring a replacement property with a lower mortgage than the relinquished property

If the taxpayer takes on less debt on the replacement property than existed on the relinquished property, the net debt relief is treated as mortgage boot.

Question 109: The 95% rule allows a taxpayer to identify any number of properties, but requires that:

At least 95% of the identified properties be acquired (Correct answer)
The replacement properties have a combined FMV of at least 95% of the relinquished property
95% of exchange funds be reinvested within 45 days
The QI hold at least 95% of the exchange proceeds

Correct answer: At least 95% of the identified properties be acquired

Under the 95% rule, a taxpayer may identify any number of properties but must actually receive 95% or more of the aggregate FMV of all identified properties.

Question 110: Which agency primarily enforces exchange rules in the U.S.?

FDA
FBI
SEC (Correct answer)
IRS

Correct answer: SEC

The Securities and Exchange Commission (SEC) is the primary federal agency responsible for enforcing exchange rules in the U.S. Its mission is to protect investors, maintain fair and orderly markets, and facilitate capital formation. The SEC achieves this by enforcing federal securities laws and regulating market participants.

Question 111: Can a taxpayer instruct the QI to pay exchange-related expenses (e.g., closing costs) directly from exchange funds?

No, all exchange funds must be held until replacement property is acquired
Yes, qualified exchange expenses can be paid from exchange funds without creating boot (Correct answer)
No, all expenses must be paid separately by the taxpayer
Yes, but only up to 5% of the exchange amount

Correct answer: Yes, qualified exchange expenses can be paid from exchange funds without creating boot

Qualified exchange expenses such as closing costs and QI fees can be paid from exchange proceeds without being treated as taxable boot.

Question 112: In a delayed (Starker) exchange, what is the correct order of events?

Sell relinquished property first, then identify and acquire replacement property within deadlines (Correct answer)
Identify replacement property first, then list the relinquished property
Acquire replacement property first, then sell relinquished property
Simultaneously sell and acquire both properties on the same day

Correct answer: Sell relinquished property first, then identify and acquire replacement property within deadlines

In a delayed exchange, the taxpayer sells the relinquished property first, then identifies and acquires the replacement property within the 45/180-day deadlines.

Question 113: What should a taxpayer do if they want to ensure the full 180-day exchange period is available?

Ask the QI to hold funds beyond 180 days
Close the relinquished property in January
Waive the 45-day identification deadline
File for a tax return extension before the exchange period ends (Correct answer)

Correct answer: File for a tax return extension before the exchange period ends

Filing a tax return extension before the exchange period ends ensures the return due date does not shorten the 180-day exchange period.

Question 114: For purposes of gain recognition on a 1031 exchange reported on IRS Form 8824, which line captures the recognized gain that flows to Schedule D or Form 4797?

Line 20 — Gain recognized (lesser of line 15 or line 19) (Correct answer)
Line 12 — Realized gain on exchange
Line 25 — Adjusted basis of replacement property
Line 7 — Fair market value of like-kind property received

Correct answer: Line 20 — Gain recognized (lesser of line 15 or line 19)

Form 8824, Line 20 captures the recognized gain as the lesser of the boot received (line 15) or the realized gain (line 19), and this amount flows to Schedule D or Form 4797.

Question 115: A taxpayer wants to use a 1031 exchange to consolidate two smaller rental properties into one larger commercial property. Is this permitted?

Yes, multiple relinquished properties can be exchanged for one or more replacement properties (Correct answer)
No, only one-to-one exchanges are allowed
No, consolidation exchanges require a special IRS ruling
Yes, but only if both properties are in the same state

Correct answer: Yes, multiple relinquished properties can be exchanged for one or more replacement properties

A taxpayer can relinquish multiple properties and acquire one or more replacement properties in a single 1031 exchange transaction.

Question 116: A taxpayer sells a property with an adjusted basis of $100,000 for $400,000 (no debt) and acquires replacement property worth $350,000. Ignoring selling costs, what is the recognized gain?

$300,000
$250,000
$50,000 (Correct answer)
$0

Correct answer: $50,000

Realized gain is $300,000; the $50,000 shortfall in reinvestment equals the boot received; recognized gain is the lesser of $50,000 or $300,000, which is $50,000.

Question 117: In a 1031 exchange involving a multi-asset property (e.g., a motel with furniture), how are the personal property components treated after the TCJA?

The IRS allows a 10% personal property exception
The full motel value qualifies for 1031 exchange treatment
Personal property components are excluded from 1031 exchange treatment and may be taxable (Correct answer)
Personal property components receive a 5-year deferral period

Correct answer: Personal property components are excluded from 1031 exchange treatment and may be taxable

After TCJA, personal property (furniture, fixtures, equipment) within a multi-asset property no longer qualifies for 1031 exchange treatment and may trigger taxable gain.

Question 118: A taxpayer's realized gain on the relinquished property is correctly calculated as:

Boot received minus qualifying exchange expenses
Net equity in replacement property minus net equity in relinquished property
Replacement property FMV minus relinquished property FMV
Amount realized (sale price less selling costs) minus the adjusted basis of relinquished property (Correct answer)

Correct answer: Amount realized (sale price less selling costs) minus the adjusted basis of relinquished property

Realized gain equals the amount realized (gross proceeds minus selling costs) less the adjusted basis of the property given up, following standard gain computation rules.

Question 119: Under IRC Section 1031, what happens to the taxpayer's basis in the replacement property?

It carries over from the relinquished property (substituted basis) (Correct answer)
It is set to the replacement property's purchase price minus depreciation
It is set to the fair market value of the replacement property
It is reset to zero

Correct answer: It carries over from the relinquished property (substituted basis)

The taxpayer's basis in the replacement property is the substituted basis — generally the adjusted basis of the relinquished property carried forward.

Question 120: Which federal agency currently regulates Qualified Intermediaries at the national level?

The IRS (Internal Revenue Service)
No single federal agency — QIs are largely unregulated at the federal level (Correct answer)
The SEC (Securities and Exchange Commission)
The Federal Reserve

Correct answer: No single federal agency — QIs are largely unregulated at the federal level

QIs are not federally licensed or regulated; oversight is primarily at the state level and through industry self-regulation.

Certified Exchange Specialist (CES)

The CES credential, awarded by the Federation of Exchange Accommodators (FEA), certifies expertise in IRC Section 1031 like-kind exchange rules, qualified intermediary responsibilities, exchange structures, timelines, and tax deferral strategies.

120

Questions

150 min

Time Limit

75%

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