Who determines if an investor is accredite

[Jane S.]

I’m wondering if the IRS has anything to do with deciding who's an accredited investor or what agency does make the determination.

And if after all the work Can this be used to deny 1031 approval?

Also what % of 1031 exchanges get denied?

Thanks.

[Dave Foster]

@Jane S. Accreditation status has nothing to do with a 1031 exchange.  Anyone can do a 1031 exchange.  Some offerings are open only to accredited investors.  The SEC sets the requirements and securities brokers help you sort though that.  But that doesn't impact your 1031 exchange.

Most QI's and accountants are pretty good at helping investors determine their property's eligibility for a 1031 exchange.  The vast vast vast % of 1031 exchanges complete never have any issues.  They are only denied if you are audited for some other reason and they look at the structure of your 1031 and decide you did not do it the right way.

[Carlos Ptriawan]

There're few companies that can check and verify your accredited investor status.
You could talk to your CPA as well.

[Ian Ippolito]

Quote from @Jane S.:

I’m wondering if the IRS has anything to do with deciding who's an accredited investor or what agency does make the determination.

And if after all the work Can this be used to deny 1031 approval?

Also what % of 1031 exchanges get denied?

Thanks.

As Dave mentioned: you don't have to be accredited to do a generic 1031 exchange.

However if you are 1031 exchanging into a private offering/fund (like a DST on 1031 Crowdfunding.com) then you usually do need to be accredited.

1) Securities law/SEC makes the rules about this but doesn't certify accreditation. 
2) The way you certify depends on the type of offering and the sponsor who is offering it can tell you what the rules are. If it operates under 506B then you self certify by answering questions. If it operates under 506c then you need to provide proof via bank accounts, tax returns, etc.

The rules are here: 
https://www.investopedia.com/terms/a/accreditedinvestor.asp

[Colton Hahn]

The SEC determines the qualifications. A CPA or lawyer can sign off that you meet the SEC accredited requirements, which will satisfy the sponsor you are considering. 

Hope that helps :)

[Jane S.]

THANK YOU DAVE

[Basit Siddiqi]

The SEC provides guidance of who is an accredited investor.
The income method using AGI from the tax return.
However, there are other methods to qualify outside of the income method.($200,000 if only factoring your income or $300,000 if factoring in a spouse).