NAC: CHAPTER 645G - QUALIFIED INTERMEDIARIES FOR TAX-DEFERRED EXCHANGES OF PROPERTY

[Rev. 5/25/2022 11:35:24 AM]

[NAC-645G Revised Date: 7-11]

CHAPTER 645G - QUALIFIED INTERMEDIARIES FOR TAX-DEFERRED EXCHANGES OF PROPERTY

645G.010 Definitions.

645G.020 “Act as a qualified intermediary” interpreted.

645G.030 “Advertises or holds himself or herself out as prepared to facilitate a tax-deferred exchange of property in this State by acting as the custodian of money or other property” interpreted.

645G.040 “Officer” interpreted.

645G.050 Registration: Application; effective date; expiration; notice of denial.

645G.060 Rejection of application.

645G.070 Renewal of registration.

645G.080 Revocation of registration; procedure.

645G.090 Bond or deposit: Minimum amount; increase of minimum amount; objection by applicant; procedural requirements.

645G.100 Purposes and restrictions of bond.

645G.110 Deposit of security in lieu of bond.

645G.120 Claim for reimbursement of financial losses caused by qualified intermediary; exceptions.

645G.130 Approval and payment of claim.

645G.140 Denial of claim; appeal.

REVISER’S NOTE.

The provisions of NAC 645G.010 to 645G.140, inclusive, which provide for the regulation of qualified intermediaries, were adopted by the Real Estate Division of the Department of Business and Industry pursuant to the former provisions of NRS 645.606 to 645.6085, inclusive. Chapter 517, Statutes of Nevada 2007, at pages 3104-3122, transferred the regulatory authority concerning qualified intermediaries to the Division of Financial Institutions of the Department of Business and Industry. Section 53 of chapter 517, Statutes of Nevada 2007, at page 3121, provides that:

“A regulation adopted by the Real Estate Division of the Department of Business and Industry pursuant to NRS 645.606 to 645.6085, inclusive, remains in effect as a regulation of the Division of Financial Institutions of the Department of Business and Industry until amended or repealed by the Division of Financial Institutions.”

NAC 645G.010 Definitions. (NRS 645.6065) As used in NAC 645G.010 to 645G.140, inclusive, unless the context otherwise requires:

1. “Agreement” means a written agreement between a qualified intermediary and a client in which the qualified intermediary agrees to act as an intermediary in an exchange of real property for the benefit of the client.

2. “Person” has the meaning ascribed to it in NRS 0.039.

(Added to NAC by Real Estate Div., eff. 3-30-94)—(Substituted in revision for NAC 645.772)

NAC 645G.020 “Act as a qualified intermediary” interpreted. (NRS 645.6065) As used in subsection 1 of NRS 645.6065, the Division will interpret “act as a qualified intermediary” to include:

1. Entering into an agreement with a client who wishes to:

(a) Relinquish real property located in Nevada in exchange for other real property in a tax-deferred exchange; or

(b) Acquire real property located in Nevada that the client identifies to replace relinquished property in a tax-deferred exchange.

2. Maintaining an office in Nevada to solicit or conduct business as a qualified intermediary, regardless of where the real property which is the subject of the exchange is located or where the client resides.

(Added to NAC by Real Estate Div., eff. 3-30-94; A 3-1-96; R126-04, 10-31-2005)—(Substituted in revision for NAC 645.774)

NAC 645G.030 “Advertises or holds himself or herself out as prepared to facilitate a tax-deferred exchange of property in this State by acting as the custodian of money or other property” interpreted. (NRS 645.606, 645.6065)

1. As used in subsection 2 of NRS 645.606, except as otherwise provided in subsection 2 of this section, the Division will interpret “advertises or holds himself or herself out as prepared to facilitate a tax-deferred exchange of property in this State by acting as the custodian of money or other property” to include a person making a statement that he or she is ready, willing, and able to act as a qualified intermediary, an escrow holder of a qualified escrow account, a trustee of a qualified trust, as those terms are defined in 26 C.F.R. § 1.1031(k)-1(g), or as a custodian of property in a tax-deferred exchange of real property as a part of:

(a) Advertising in printed publications which are published in Nevada, including telephone directories for locations in Nevada;

(b) Advertising by direct mail or circulating material to residents of Nevada;

(c) Telephone calls, electronic or telephonic transmissions to a facsimile machine or other electronic communications directed as solicitations to residents or other persons located in Nevada; or

(d) Advertising with a broadcast medium that initiates its broadcasts in Nevada.

2. The interpretation set forth in subsection 1 does not include:

(a) Advertising for and teaching seminars or classes, or giving presentations to attorneys, accountants, real estate licensees, persons who offer tax advice, or other persons where the primary purpose is to teach the persons about tax-deferred exchanges of real property or about acting as a qualified intermediary, an escrow holder of a qualified escrow account, or a trustee of a qualified trust;

(b) Advertising in regional or national publications which are published outside Nevada, even if the publications are distributed to residents of Nevada as well as residents of other states, unless the text of the advertisement specifically refers to Nevada or any location in Nevada; or

(c) Advertising with a broadcast medium which initiates its broadcasts outside Nevada, even if the broadcasts are received by persons in Nevada as well as persons in other states, unless the advertisement specifically refers to Nevada or any location in Nevada.

(Added to NAC by Real Estate Div., eff. 3-30-94; A 3-1-96)—(Substituted in revision for NAC 645.776)

NAC 645G.040 “Officer” interpreted. (NRS 645.6065, 645.607) As used in NRS 645.607, the Division will interpret “officer” to include the president and any vice president, secretary, or treasurer of the corporation.

(Added to NAC by Real Estate Div., eff. 3-30-94)—(Substituted in revision for NAC 645.778)

NAC 645G.050 Registration: Application; effective date; expiration; notice of denial. (NRS 645.6065)

1. An application for registration submitted pursuant to NRS 645.6065 is not effective until the application is accepted by the Division. Within 10 days after receipt of an application for registration, the Division will accept or deny the application.

2. In addition to the information required by NRS 645.6065, an application for registration must include:

(a) A list of all judgments that have been entered against the applicant by a court or administrative agency for which the applicant is liable, including judgments which are under appeal but for which enforcement has been stayed.

(b) A description of any litigation or matters referred to alternative methods of resolving disputes which involve the applicant and which could result in a judgment against the applicant. The description does not need to include a prediction of the possible outcome of the litigation or other matters.

(c) The name and address of the financial institution and current balance of all accounts in which the applicant is holding money for clients at the time the application is completed. The applicant does not need to identify the clients or the specific amounts being held for any client.

(d) A statement of whether the applicant or any of its owners, directors, officers, or employees have been convicted of racketeering or any offense involving fraud, theft, embezzlement, fraudulent conversion, or misappropriation of property, and, if so, a certified copy of the record of conviction must be provided.

(e) A statement of whether the applicant or any of its owners, directors, officers, or employees have had entered against them a final judgment or order, including a stipulated judgment or order, in any civil or administrative action involving racketeering, fraud, theft, embezzlement, fraudulent conversion, misappropriation of property, the use of any untrue or misleading representation in an attempt to sell property or services, or the use of any unfair, unlawful, or deceptive trade practice, and, if so, a certified copy of each judgment or order, including the findings of fact and conclusions of law, must be provided.

(f) A statement of whether a receiver has been appointed to take control of any of the assets of the applicant or whether the applicant is in the process of corporate dissolution, reorganization, merger, sale of assets, or any other business combination.

3. If the Division accepts an application for registration, it will issue a certificate of registration to the applicant. The certificate of registration will state the date the registration becomes effective and the date upon which the registration expires. In no case will the registration expire on a date later than the date on which the bond or other deposit posted by the qualified intermediary expires.

4. If the Division denies an application for registration, it will send a notice to the applicant which informs the applicant of the reasons for denial.

5. The Division will not withhold acceptance of an application pending the outcome of an investigation conducted by the Federal Bureau of Investigation pursuant to NRS 645.6065 on the background of the applicant.

(Added to NAC by Real Estate Div., eff. 3-30-94)—(Substituted in revision for NAC 645.780)

NAC 645G.060 Rejection of application. (NRS 645.190, 645.6065)

1. The Division will reject an application which:

(a) Does not conform with the requirements of NRS 645.6065;

(b) Does not include information sufficient for the Division to determine the minimum amount of the bond or other deposit to be posted pursuant to NRS 645.608; or

2. The Division will not refund the fee for the application for registration.

(Added to NAC by Real Estate Div., eff. 3-30-94; A by Real Estate Comm’n by R111-01, 12-17-2001)—(Substituted in revision for NAC 645.782)

NAC 645G.070 Renewal of registration. (NRS 645.6065)

1. A registrant must file annually with the Division an application for the renewal of his or her registration on forms supplied by the Division. For renewal of his or her registration, a registrant must submit any information or fingerprint cards necessary to make current the information contained in his or her original application for registration.

2. To avoid a lapse in registration, the Division must receive a registrant’s application for the renewal of registration accompanied by the appropriate fee required by NRS 645.6065 at least 10 days before expiration of the registration.

(Added to NAC by Real Estate Div., eff. 3-30-94)—(Substituted in revision for NAC 645.784)

NAC 645G.080 Revocation of registration; procedure. (NRS 645.6065)

1. After acceptance of a registration, the Division may revoke a registration if:

(a) The Division discovers that a registrant supplied information in his or her application for registration which is false, materially misleading or incomplete;

(b) Any portion of the amount of the bond or deposit that the registrant posted pursuant to NRS 645.608 has been drawn upon, terminated or is otherwise no longer available;

(c) The Division demands an increase in the minimum amount of the bond or other deposit pursuant to NAC 645G.090 during the period of registration and the registrant fails to post the additional amount; or

(d) A registrant fails to inform the Division of a change of address or telephone number as required by NRS 645.6075.

2. To revoke a registration, the Division will notify the registrant of the revocation and provide a 30-day notice of a hearing to be conducted by an administrative hearing officer of the Department of Business and Industry pursuant to the provisions of chapter 233B of NRS.

(Added to NAC by Real Estate Div., eff. 3-30-94; A 3-1-96)—(Substituted in revision for NAC 645.786)

NAC 645G.090 Bond or deposit: Minimum amount; increase of minimum amount; objection by applicant; procedural requirements. (NRS 645.6065, 645.608)

1. Except as otherwise provided in subsection 2, the minimum amount of a bond or other deposit required by NRS 645.608 must be $50,000.

2. The Division may, as appropriate, increase the minimum amount of the bond or other deposit to not more than:

(a) The amount of any outstanding judgments or tax assessments against the applicant;

(b) Fifty percent of the amount in controversy reported to the Division in accordance with paragraph (b) of subsection 2 of NAC 645G.050; or

(c) The amount specified in paragraph (c) of subsection 2 of NAC 645G.050 if the information supplied pursuant to paragraph (d), (e), or (f) of subsection 2 of NAC 645G.050 is in the affirmative.

3. If an applicant objects to an increase in the minimum amount of the bond or other deposit required by the Division pursuant to subsection 2, the applicant may appeal the decision by requesting a hearing before the Commission. The request must be in writing and received by the Division within 30 days after the date on which the Division informed the applicant of the increase.

4. If an applicant appeals a decision of the Division pursuant to subsection 3, the hearing will be held in the manner set forth in NRS 645.440. At the hearing, the applicant has the burden of proving that the increase in the minimum amount of the bond or other deposit required by the Division is unreasonable.

(Added to NAC by Real Estate Div., eff. 3-30-94; A by R126-04, 10-31-2005)—(Substituted in revision for NAC 645.788)

NAC 645G.100 Purposes and restrictions of bond. (NRS 645.6065, 645.608)

1. Except as otherwise provided in subsection 2, a bond posted pursuant to NRS 645.608, must, to the satisfaction of the Division:

(a) Assure payment to all clients up to the amount of the bond in all covered transactions for losses suffered by clients because the principal misappropriates, embezzles, converts, wrongfully encumbers, loses, or fails to convey or cause to be conveyed to the intended party any property which comes into the principal’s possession or control;

(b) Cover losses incurred as a result of actions or inactions by the principal during the period of the bond; and

(c) Be effective for a period not less than 18 months after the date of the application for registration or the renewal of registration.

2. The bond:

(a) Need only cover losses in transactions in which the principal acts as a qualified intermediary in Nevada;

(b) May limit payment of losses to the actual cash value or fair market value of the property lost by the client and may expressly exclude attorney’s fees, costs of collection and special, consequential, and exemplary damages;

(d) Need not assure that the qualified intermediary will carry out his or her obligations in such a way as to assure that the transaction will qualify as a nontaxable deferred exchange of real property.

(Added to NAC by Real Estate Div., eff. 3-30-94)—(Substituted in revision for NAC 645.790)

NAC 645G.110 Deposit of security in lieu of bond. (NRS 645.6065, 645.608)

1. If, in accordance with subsection 2 of NRS 645.608, an applicant posts a letter of credit with the Division, the letter of credit must:

(a) Be irrevocable and be effective for a period not less than 18 months after the date of the application for registration or renewal of registration.

(b) State that the issuer will honor multiple drafts for payment upon compliance with the terms of the credit;

(d) Name the Division as the beneficiary for the benefit of the clients of the qualified intermediary.

2. If, in accordance with subsection 2 of NRS 645.608, an applicant posts a savings certificate, certificate of deposit, or investment certificate, the certificate must comply with the requirements of subsection 2 of NRS 645.608. Interest earned on a certificate may accrue to the account of the qualified intermediary.

(Added to NAC by Real Estate Div., eff. 3-30-94; A 7-7-94)—(Substituted in revision for NAC 645.792)

NAC 645G.120 Claim for reimbursement of financial losses caused by qualified intermediary; exceptions. (NRS 645.6065, 645.6085)

1. To obtain reimbursement for financial losses caused by the illegal conduct of a qualified intermediary pursuant to NRS 645.6085, a person must file a claim with the Division in writing on forms supplied by the Division. The claimant must provide information satisfactory to the Division to demonstrate that his or her loss is properly recoverable.

2. The Division will approve a claim if:

(a) The claimant was a resident of Nevada at the time of the loss;

(b) The loss was caused by a qualified intermediary, regardless of whether the qualified intermediary was registered in Nevada;

(1) The misappropriation, embezzlement, conversion, wrongful encumbrance, or failure by the qualified intermediary to convey any property to the claimant or to the party intended by the claimant;

(2) The permanent loss of possession of the property by the qualified intermediary as a result of:

(I) A bankruptcy proceeding involving the qualified intermediary or the property which was the subject of the exchange; or

(II) A foreclosure of a judgment lien, tax lien, or other lien against the qualified intermediary; or

(3) The payment by the claimant to creditors of the qualified intermediary to relieve liens against the property placed by creditors of the qualified intermediary;

(d) The claimant made a claim against the bond or other deposit, unless the Division determines that making such a claim was impracticable under the circumstances; and

(e) If the loss was a result of a voluntary act of the qualified intermediary, the claimant obtained a judgment against the qualified intermediary. As used in this paragraph, “a voluntary act of the qualified intermediary” includes willful misappropriation, embezzlement or conversion and wrongful encumbrance and conveyance of property to a person other than its intended beneficiary.

3. The Division will approve claims only in the amount of the actual amount of cash lost by the claimant or the fair market value of the property that was misappropriated or lost by the qualified intermediary.

4. The Division will not approve payment of:

(a) Attorney’s fees;

(b) Costs of collection;

(d) Interest.

5. A claimant may not recover his or her losses if an exchange of property does not qualify for nontaxable deferred status.

(Added to NAC by Real Estate Div., eff. 3-30-94)—(Substituted in revision for NAC 645.794)

NAC 645G.130 Approval and payment of claim. (NRS 645.6065, 645.6085)

1. If the Division approves a claim, it will inform the claimant of the amount of the claim approved, and will explain the procedures for payment of claims set forth in subsection 2.

2. If the Division allows a claim, it will hold the claim for 2 years and pay against the claim as money becomes available pursuant to NRS 645.6085. As money becomes available, the Division will pay claims on a pro rata and equal priority basis.

3. Payments on a claim will cease when the claim has been satisfied or 2 years after the date on which the Division made the first payment on the claim, whichever occurs first.

(Added to NAC by Real Estate Div., eff. 3-30-94)—(Substituted in revision for NAC 645.796)

NAC 645G.140 Denial of claim; appeal. (NRS 645.6065, 645.6085)

1. If the Division denies a claim, it will inform the claimant of its decision in writing and explain the claimant’s rights of appeal set forth in subsection 2.

2. If a claimant is not satisfied with the amount of a claim approved by the Division or if the Division denies a claim, the claimant may appeal the decision to the Commission. The appeal must be in writing and received by the Division within 30 days after the claimant is notified of the Division’s decision. The Division will schedule a hearing with the Commission within 90 days after receipt of the request for a hearing from the claimant. At the hearing, the claimant has the burden of proving to the satisfaction of the Commission that the claimant qualifies for reimbursement in the amount of his or her claim.

(Added to NAC by Real Estate Div., eff. 3-30-94)—(Substituted in revision for NAC 645.798)