Tax News
Qualified Intermediaries and Real Estate Withholding

FTB Archive Disclaimer:  Archived content is not current and may contain broken links. It remains online for historical reference or research. The search function above allows you to search archived and current content separately. If you need archived content in a different format, contact us.

If you are a Qualified Intermediary (QI) or an accommodator, meaning the entity that facilitates a like-kind exchange, it is very important to know the difference between a simultaneous[1] or deferred exchange.[2] Here is why:

California Revenue and Taxation Code Section (R&TC) 18662(e)(2)(A) states that in the case of any disposition of a California real property interest by a transferor, the transferee, including for this purpose any intermediary or accommodator in a deferred exchange, is required to withhold an amount equal to 3 1/3 percent of the sales price of the California real property conveyed. Section 18662(e)(3)(B) states that an intermediary or an accommodator in a deferred exchange is required to withhold even if the real estate escrow person (REEP) fails to provide the written notice.

Why is this important? A REEP is required by statute to provide written notice to the buyer of the withholding requirements unless it is a deferred exchange. A deferred exchange is specifically mentioned in statute and requires the QI to withhold on a deferred exchange when required. If a QI is involved, then the REEP does not have the requirement to provide notification of withholding to the buyer. Therefore, a QI cannot say that the reason there is no withholding is because the REEP didn't notify me of our withholding requirements.

A QI in a deferred exchange has withholding obligations and is subject to penalties for failure to do so. As a QI you must withhold when boot is paid or the exchange fails, or you may be liable[3] for the greater of the following amounts for failure to withhold:

  • Five hundred dollars ($500)
  • Ten percent of the amount required to be withheld

When there is a deferred exchange, the REEP does not have an obligation to notify or withhold for the buyer. However, if there is a simultaneous exchange, the REEP is required to notify the buyer including for this purpose any QI.

At a glance, the table below summarizes who is responsible for notification, penalties, and withholding on California real property interest in a deferred exchange and simultaneous exchange:

Responsible Party Simultaneous Exchange Deferred Exchange

Notification to Buyer



Subject to Penalties



Withholding Agent




Contact us between 8 a.m. to 5 p.m. weekdays, except state holidays.


  • 888.792.4900
  • 916.845.4900 (outside U.S.)

California Relay Service
711 or 800.735.2929

TTY (Device to Device)

Fax: 916.845.9512

Email: Withholding Services - Use this email service for general questions that do not require entering confidential information

[1] A simultaneous like-kind exchange occurs when you close the entire transaction simultaneously. A simultaneous exchange is when escrow closes concurrently on the relinquished property (the property being sold in the exchange) and the replacement property (the property being purchased in the exchange).
[2] A deferred like-kind exchange is more complex but allows you to dispose of property and subsequently acquire one or more other like-kind replacement properties. A deferred exchange is when you transfer property you use in business or hold for investment and later receive like-kind property you will use in business or hold for investment. The transaction must be an exchange (that is, property for property) rather than a transfer of property for money used to buy replacement property. Refer to Internal Revenue Code Section 1031 and its regulations for complete rules and definitions.
[3] California Revenue and Taxation Code Section 18668(d).

Back to April 2015 Tax News

Is there something wrong with this page?

Help us improve our website

Don't include social security numbers or other personal/confidential information.


You are leaving

We do not control the destination site and cannot accept any responsibility for its contents, links, or offers. Review the site's security and confidentiality statements before using the site.

If you have any issues or technical problems, contact that site for assistance.

Ahora está saliendo de

Nosotros no controlamos el sitio web al que se destina y no podemos aceptar ninguna responsabilidad por su contenido, enlaces, u ofertas. Revise las declaraciones de seguridad y confidencialidad del sitio antes de usar el sitio. Si tiene algún problema en general o técnico, comuníquese con ese sitio para obtener asistencia.

Si tiene algún problema en general o técnico, comuníquese con ese sitio para obtener asistencia.