For CPAs and Tax Professionals
Help Your Clients Defer Capital Gains With a 1031 Exchange
When your real estate investor clients sell investment property, a 1031 exchange can defer capital gains taxes and depreciation recapture entirely. As their CPA, you are often the first advisor they call. This guide explains how the exchange works, what your role is, and how to refer clients to a Qualified Intermediary before it is too late.
Steve Wolterman, CES
Licensed Attorney and Qualified Intermediary
Nationwide Service
All 50 States
The Most Important Thing CPAs Need to Know About 1031 Exchanges
The Qualified Intermediary must be engaged before the deed transfers on the relinquished property. Once the client has constructive receipt of the sale proceeds, the exchange is permanently disqualified. There is no cure and no exception. If your client calls you after closing to ask about deferring taxes, it is too late. The time to refer is when the listing agreement is signed or the property goes under contract.
The Tax Impact: With and Without a 1031 Exchange
The following example illustrates the tax deferral available on a typical investment property sale. These figures are for illustration purposes only. Actual tax liability depends on the client's specific basis, depreciation history, state of residence, and applicable tax rates.
Example Transaction
Sale Price
$1,200,000
Original Basis
$300,000
Accumulated Depreciation
$120,000
| Tax Item | Without Exchange | With 1031 Exchange |
|---|---|---|
| Federal Capital Gains Tax (20%) | $180,000 | $0 |
| Depreciation Recapture (25%) | $30,000 | $0 |
| State Income Tax (est. 5%) | $45,000 | $0 |
| Total Tax Due | $255,000 | $0 |
| Investable Proceeds | $945,000 | $1,200,000 |
For illustration only. Assumes 20% federal long-term capital gains rate, 25% depreciation recapture rate, and 5% blended state rate. NIIT (3.8%) not included. Consult a tax professional for client-specific calculations.
Why CPAs Refer Clients to 1031 Federal Exchange
A referral to a qualified, attorney-led QI is one of the highest-value services a CPA can provide to real estate investor clients. Here is why CPAs across the country partner with our team.
Protect Your Client From a Costly Mistake
The most common 1031 exchange error is engaging a QI after the deed has already transferred. Once the client has constructive receipt of the funds, the exchange is disqualified and the full tax bill is due. Referring early protects your client and demonstrates the value of proactive tax planning.
Quantify the Tax Savings Before the Sale
We can provide a preliminary exchange analysis showing the estimated capital gains, depreciation recapture, and net tax deferral for your client's specific transaction. This gives you a concrete number to present during tax planning meetings and helps clients understand the financial case for exchanging.
Strengthen Your Client Relationships
Clients who successfully defer six-figure tax bills remember who made it happen. Positioning yourself as the advisor who identified the exchange opportunity builds long-term loyalty and generates referrals from your existing client base.
Attorney-Led QI Adds a Layer of Legal Protection
Steve Wolterman is a licensed attorney and Certified Exchange Specialist (CES). When your client's exchange funds are held by an attorney-QI rather than a non-attorney intermediary, there is an additional layer of fiduciary accountability and legal expertise. This matters when transactions are complex or disputes arise.
We Handle the Complexity, You Handle the Tax Strategy
Our team manages the exchange mechanics -- documents, fund custody, identification letters, closing coordination -- so you can focus on the tax planning side. We are available for three-way calls with you and your client at any stage of the exchange.
Nationwide Service, No Geographic Restrictions
We handle exchanges in all 50 states. Whether your client is selling a rental in Ohio or a commercial building in Texas, we can facilitate the exchange and coordinate with local title companies and real estate attorneys.
How the Referral Process Works
Referring a client is straightforward. Here is what happens from your first call to exchange completion.
You Identify the Exchange Candidate
During tax planning or when a client mentions they are selling investment property, you recognize the exchange opportunity and recommend they contact a QI before closing. The earlier in the transaction, the better.
You Make the Introduction
Call us directly at 513-951-4757 or send your client our way. We are available for a three-way introductory call with you and your client to explain the process, answer questions, and confirm the exchange is viable given the transaction timeline.
We Handle the Exchange Mechanics
We prepare the Exchange Agreement, coordinate with the title company, hold the exchange funds in a segregated escrow account, and manage the 45-day identification and 180-day replacement deadlines. You stay in the loop on all key milestones.
We Provide Year-End Documentation
At exchange completion, we provide a full documentation package including the Exchange Agreement, closing statements, identification letter, and a summary of proceeds and any boot. You have everything you need for the client's tax return.
Your Client Keeps More Capital Working
The client reinvests the full sale proceeds into the replacement property, compounding their real estate portfolio without a tax haircut. You get the credit for making it happen.
Your QI Partner
Steve Wolterman, CES
Steve is a licensed attorney and Certified Exchange Specialist (CES) with decades of experience facilitating 1031 exchanges for real estate investors nationwide. As an attorney-QI, Steve provides an additional layer of fiduciary accountability that non-attorney intermediaries cannot offer. CPAs who refer clients to Steve know their clients are in qualified, legally accountable hands.
Common Questions from CPAs and Tax Professionals
Answers to the questions we hear most often from CPAs, enrolled agents, and tax advisors who are new to working with a Qualified Intermediary.
Ready to Refer a Client or Ask a Question?
Call us directly or schedule a consultation. We are available for three-way calls with you and your client at any stage of the transaction.