In the world of IRC Section 1031 Like-Kind Property Exchanges, the promulgation of the Safe Harbor regulations by the Treasury Department in 1991 was a game changer.
For the first time since its creation in the 1920s, this tax code provision was practical to apply in New York and other “title states”, where the real estate closing process is more complex than in the “escrow state”.
Simple, clear rules were described in order for Property Owners (Exchangers) to exchange real estate without causing a capital gains tax event, using a newly created party called a “Qualified Intermediary” to officiate the process.
During the formation of New York Deferred Exchange Corporation (NYDEC), there was an expectation that dozens if not hundreds of QIs would be formed in the NY region to facilitate these newly accomplishable exchanges. Much to their surprise, NYDEC was the sole practitioner for many years. The newly formed national trade association, Federation of Exchange Accommodators (FEA), met annually with about a dozen QIs from around the country to discuss how to help property owners become aware of the benefits offered through exchanges. The FEA commended NYDEC for its leadership in its creative application of the regulations for the benefit of many property owners.
Throughout the 1990s, the press took notice of the rising use of IRC 1031 in general and NYDEC as a leading practitioner. Kenneth Harney, The Washington Post’s leading syndicated real estate columnist wrote an article (click here to read) on the application of IRC 1031 featuring NYDEC. When the article appeared in approximately 100 newspapers in most major markets throughout the Country, NYDEC became both nationally recognized and inundated with inquiries. Since that time NYDEC has continued its status as a seasoned and knowledgeable leader in the field.
Due to its time-tested reputation of integrity and professionalism, NYDEC has been an active acquisition target by large banks and title companies for decades. NYDEC principals have respectfully declined these opportunities, preferring to continue as an unencumbered independent practitioner helping property owners in a more boutique, strategic planning fashion.