A tax deferred exchange offers taxpayers one of the last great opportunities to build wealth and save taxes. An exchanger can sell their investment property and acquire a replacement property, and defer the tax that would ordinarily be due upon the sale.

An exchange is rarely a swap of properties between two parties. Most exchanges involve multiple parties. To create the exchange of assets while realizing the benefits of the tax code, taxpayers often use a professional qualified intermediary such as IPX1031^®, which prevents actual or constructive receipt of exchange funds. Without a qualified intermediary, the exchange could be considered invalid.

At the end of the year many of our customers are scrambling to find ways to save on their taxes. Investors are rushing to sell or buy new investments. There are very specific time frames which must be met to take advantage of a 1031 exchange. In some instances, the exchangers are unable to meet the deadline and their exchange is terminated. This is when fraudsters try to strike.

Lou Ninios, an IPX1031 employee in the Texas region, worked on a file where the exchange was being terminated. Lou emailed disbursement on termination instructions to the exchangers to complete and sign with their wiring instructions to return the terminated exchange funds.

The form was completed and promptly emailed back to Lou. Upon receipt, Lou reviewed the instructions and found it odd the exchangers' bank account was in Warsaw, Poland. He picked up the phone and called the exchangers at a trusted phone number to verify the wire instructions; which is standard operating procedure for IPX1031.

The exchangers were very confused. They never received an email from Lou and the wire instructions were neither for their bank nor their account. It was clear the instructions were intercepted by a hacker. The exchangers were able to determine their email account had been hacked so they promptly closed their email account. The hacker had been watching their email traffic waiting to strike.

The exchangers had almost $750,000 on deposit with IPX1031. One phone call from Lou saved those funds from being wired to an account outside of the U.S. The hackers were good too. They lifted the exchangers' signatures from another document and pasted them on an IPX1031 form. The additional instructions on the form even authorized Lou to deduct the international wire fees from their funds.

Lou recognized it was odd for his Texas clients to direct their funds to a bank in Warsaw. He followed Company policy by calling to verify the wiring instructions. The customers confirmed the disbursement authorization was fraudulent.

The highest volume of email compromise scheme attempts come on Fridays, at the end of the month, quarter and year. This typically buys the hackers extra time to succeed at their scheme. Fortunately Lou was not fooled and has received a $1,500 reward from the Company for his crime stopping skills. Congratulations Lou!