ACCOUNTANTS, ATTORNEYS, AND FINANCIAL ADVISORS BEWARE
Dowdall selected
Atlantic Exchange Company, LLC (AEC) to act as QI. During the course of the
exchange, the taxpayer’s proceeds were stolen by AEC and Edward Okun, AEC’s
sole member. The taxpayer’s loss was over $604,000.
The taxpayer argued that his loss was caused by Dowdall’s legal malpractice,
including:
- Failure to properly investigate
AEC before selecting it as QI;
- Failure to confirm that AEC was
sufficiently bonded before recommending AEC as the QI, and;
- Failure to confirm that the
taxpayer’s exchange proceeds were deposited into an account on behalf of
the taxpayer as required by the terms of the exchange agreement.
The Court determined
that Dowdall did not adhere to their duty to perform
sufficient due diligence in that they did not sufficiently investigate the QI
prior to recommending the company to the taxpayer. Dowdall had represented that
they were experts on the subject of 1031 tax-deferred exchanges.
Tax, legal, and
financial advisors should realize the importance of performing sufficient due
diligence before recommending a QI to facilitate a 1031 exchange on behalf of their clients.
Asset Preservation,
Inc. (API), adheres to consistent and disciplined practices in handling
exchanger funds, overseen by its parent company Stewart Title, a
publicly-traded company (NYSE: STC).
For example, API’s
parent company, Stewart, provides a “Letter of Assurance” guaranteeing the
performance of API.
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