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Dealing with Reputable Real Estate Companies

Donald L. Plunkett, Jr. Donald L. Plunkett, Jr.

The Arizona Republic reported today on a couple that has been indicted for among other things fraud and theft of more than $1MM from real estate investors. They ran three different enterprises: 1031 Exchange Consultants LLC, Tax Management Consultants LLC and Executive Realty Group LLC.

In a 1031 exchange, an investor has proceeds of one sale wired to a qualified intermediary company that is supposed to hold the funds then wire them onto another escrow company when the investor closes on a purchase (this way taxes are avoided on the original sale). Unfortunately, there have been instances where this does not happen as planned. Southwest 1031 Exchange out of Las Vegas was shut down with $80MM to $90MM of investor money missing.

Dealing with reputable service providers in real estate is absolutely essential. Whether it is a real estate broker, a real estate attorney, a mortgage company, a flat fee MLS listing service, a tax preparer, or any other service provider, make sure that the company can be trusted. In the case of the investors who trusted these 1031 companies with their money, they may very well end up with a massive tax liability and an evaporation of the real estate equity that took years to build.

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