1031 Exchange Intermediary Files Bankruptcy; $Millions Unaccounted For

The San Jose Mercury News is reporting that the 1031 exchange intermediary:

• "1031 Tax Group of Richmond, Va., which operated in San Jose as 1031 Advance, filed for bankruptcy in New York City over the weekend. But even before then, it had become the subject of investigations by the U.S. Postal Service and U.S. Attorney's Office in Virginia."

Millions of dollars of investors money that was being held by the 1031 exchange intermediary for reinvestment by the investors is reportedly missing. One couple trusted the company with $10.6 million, and another investor had over $3.3 million of her investment money held by the company.

A 1031 exchange (a reference to Section 1031 of the Internal Revenue Code) is a method by which real estate investors may defer capital gains taxes if they sell and buy property within a 180 day time period. To delay paying taxes, investors must place the money with an independent third party - a trust company, title company, or an entity referred to as a qualified intermediary, until the deal is done. In these transactions, such independent third parties hold onto the money until the investor identifies the new property and closes escrow.

For more, see Real estate firm's collapse worries investors.

For a prior post on another 1031 exchange intermediary alleged to have misappropriated real estate investors' money, see 1031 Exchange Accomodators, Others Accused in $80 Million Theft.
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