What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?
A)To facilitate finding replacement property.
B)To help acquire the replacement property.
C)To prevent the seller from receiving cash (boot) that will taint the transaction.
D)To certify the taxpayer's Form 8824.
E)All of thesE.The receipt of cash in a transaction qualifies as boot and requires the recognition of gain.

Question

Quizplus · Accepted Answer

The primary purpose of a third-party intermediary in a deferred like-kind exchange is to prevent the seller from receiving cash (boot) that will taint the transaction. The receipt of cash in a transaction qualifies as boot and requires the recognition of gain, which defeats the tax-deferred purpose of the exchange. The intermediary acts as a neutral third-party that holds the proceeds from the sale of the relinquished property and uses them to acquire the replacement property, ensuring that the taxpayer does not have constructive receipt of the funds and that the transaction qualifies as a like-kind exchange. The intermediary also assists with paperwork and timelines, but the critical function is to prevent the taxpayer from receiving boot. Therefore, option C is the best answer. Options A, B, D, and E may be secondary benefits of using an intermediary, but they are not the primary purpose.

What Is the Primary Purpose of a Third-Party Intermediary in a Deferred