Section 1031 Exchanges are a tool to defer taxes. Properly done, using a reputable qualified intermediary, they’re a very useful tool in tax planning. Of course, some intermediaries aren’t as reputable as others.
Edward Okun owned 1031 Tax Group LLP, a qualified intermediary. His firm entered bankruptcy some time ago, and in February a bankruptcy court judge denied Mr. Okun’s motion to cancel an agreement he made to sell some of his possessions. Soon he may not have any possessions after being indicted this week.
Mr. Okun is accused of telling clients that their money would be use for §1031 exchanges and then misappropriating $132 million, “to support his lavish lifestyle, pay operating expenses for his various companies, invest in commercial real estate, and purchase additional qualified intermediary companies to obtain access to additional client funds.”
He also faces charges of violating the currency transaction reporting requirements by telling employees to put $15,000 on his yacht so he could allegedly deposit it in the Bahamas and of committing perjury. The indictment is asking for all of his remaining assets to be forfeited. He’s also looking at 30 years at ClubFed and substantial fines if he’s found guilty on all counts.
His attorney states, “Ed is confident he will be proven innocent in a court of law.” Mr. Okun has waived extradition and will soon be in Richmond, Virginia where he will await trial.
If you’re interested in pursuing a 1031 exchange, make sure you use a reputable qualified intermediary. Get references, and check them.