Rather than concentrate on a single topic, I have decided to take you inside a day in the life of a Certified Exchange Specialist (CES) by sharing real taxpayer's current questions and concerns. Q: I am selling two investment properties, one with a buyer ready to close, and one still on the market. I want to exchange for three properties, of which two are in contract and ready to close. Can I combine a forward and reverse exchange in one transaction? A: Timing is everything. But yes, you can combine a forward and reverse exchange in one transaction. The one relinquished property that is ready to close would start your exchange period for the forward exchange. You would still have to identify within the 45 days, the apportioned replacement property that would be purchased within the 180-day deadline. Both the 45 and 180-day deadlines start from the sale date of the first relinquished property sold. The remainder of the replacement property that you intend on purchasing with the sale proceeds from the second relinquished property, needs to be acquired by an exchange accommodation titleholder (EAT) arranged by the qualified intermediary. You would still need to arrange for financing or loan outside monies to the EAT in order to purchase that portion of the property for the EAT to park until you are ready to acquire it. The day the EAT takes title to that portion of the replacement property starts your second time frame on the reverse part of the exchange. You would need to identify your second relinquished property within 45 days, and sell your relinquished property and acquire that portion of the replacement property from the EAT within 180 days. This might sound tricky, but working closely with a good intermediary and tax advisor, as long as the second property sells in enough time, you can have a seamless exchange. Q: I want to sell my vacation home, since we haven't used it and rather have been renting it for some time. We want to obtain the tax benefits of a 1031 exchange to purchase other investment property. Will my old vacation place qualify for the exchange? A: The IRS promulgated guidelines, a safe harbor, which gives taxpayers a clearer understanding of whether or not their second home or vacation home qualifies for an IRC 1031 exchange. Revenue Procedure 2008-16 effective March 10 of this year, specific to this question, states that in order to qualify a vacation home or second home for purpose of 1031 treatment, the taxpayer must own the property for 24 months and rent the property for at least two consecutive weeks each year for an uninterrupted two years. The taxpayer should have a rental agreement and must charge fair market value rent for the property. The taxpayer's personal use cannot exceed the greater of 14 days or 10% of the number of days during the year that the property is rented out to someone. Q: I would like to engage in a 1031 exchange but am reluctant to do so due to an intermediary holding my sale proceeds. Can the intermediary commingle my funds with others? What if the intermediary goes bankrupt? A: Look for a reputable intermediary that does not commingle a taxpayer's funds with other taxpayers or even that of its own company's operating account. Currently, an intermediary does not have to segregate its taxpayer's funds nor give the taxpayer interest on these funds. However, regulations are underway shortly. The intermediary should be bonded for at least $1 million and have errors and omissions insurance for at least $250,000. As an intermediary, we do not commingle taxpayers' funds with others nor do we commingle these monies with the company's monies. Additionally, we are bonded for $10 million and offer competitive interest rates to the taxpayer. Professional intermediaries can be found through the Federation of Exchange Accommodator's website at www.1031.org. It is important to seek out a professional CES that adheres to a code of ethics. More detailed information on IRC 1031 transactions can be obtained by contacting me, an attorney, a tax advisor or other professional intermediaries. Diane Schaefer, CES is the president of Exchange Solutions, Inc., Freeport, N.Y.