Katherine Baker said it felt "like somebody kicked me in the stomach" when she read the newspaper Thursday and learned the FBI was investigating the closing of Southwest Exchange Inc., an accommodator of tax-free real estate exchanges.

"I realize for a lot of people $62,000 is chump change," she said. "For me, it's a lot of money."

Baker, an English professor at the Community College of Southern Nevada, was relying on Southwest Exchange to keep her profit from the December sale of a condo in Arizona. She no longer needed the condo when her daughter graduated from Arizona State University.

Baker made a $61,800 gain on the condo and had the money wired directly to Southwest Exchange so she could avoid paying a 15 percent capital gains tax on the profit for 2006. Southwest Exchange agreed to hold the money in escrow and enable Baker to use the money to buy another property.

On Tuesday, Baker informed Southwest Exchange about a house she intended to buy in Las Vegas and a clerk assured her that everything was OK.

Sometime later Tuesday, Southwest Exchange closed, posting a notice that said the staff was out for a training session.

On Wednesday, the FBI sent agents to the offices of Southwest Exchange at 2370 Corporate Circle, Suite 160, in Henderson, FBI spokesman David Staretz said. He said he could not elaborate on whether the FBI recovered documents or equipment from Southwest Exchange.

The Nevada Real Estate Division will not say whether it is investigating Southwest Exchange, saying the law prohibits it from disclosing investigations at this point.

Real estate-industry officials suggest that losses stemming from a Southwest Exchange closure could run into the hundreds of millions of dollars.

"Certainly, it's tens of millions and possibly hundreds of millions dollars," said Terrence Wright, owner and board chairman of Nevada Title Co.

Southwest Exchange charged real estate investors fees to keep their profits in escrow accounts under Section 1031 of the Internal Revenue Code. Section 1031 allows investors to use gains to buy other real estate properties without paying income tax on the gain from the sale.

Nevada provides the minimum of regulation of 1031 exchange firms, which are also known as qualified intermediaries. The state requires intermediaries to register and to obtain a $50,000 surety bond. Analysts say that leaves investors with virtually no assets to recover from a failed 1031 exchange firm -- unless the exchange company has other significant assets that can be seized through a court judgment or bankruptcy court action.

"The Real Estate Division does not have the authority to conduct an audit of the books (at Southwest Exchange)," Gail Anderson, administrator of the Nevada Real Estate Division, said in an e-mail. "Our jurisdiction is limited to the registration of the qualified intermediary and the security deposit or bond they are required to hold."

Investors may also face adverse tax consequences, said David Turner, a Reno-based certified public accountant with Turner, Loy & Co.

If an investor sold the property in 2006 and lost the proceeds from the sale in the same year, the loss offsets the gain and no taxes are owed on the real estate sale, Turner said. The problem comes when the gain was realized in 2006 and the loss happened in 2007, he said.

Then, the investor will owe capital gains taxes as high as 15 percent on the real estate sale, and potentially higher taxes of up to 25 percent, if there is any depreciation recapture on the property sold. If the loss occurred in the year following the sale, the loss is only deductible in that year, not the previous year.

The investor could use the loss to offset another investment gain in 2007 or take a maximum $3,000 deduction from ordinary income each year until the entire loss is deducted, Turner said.

Michel Mal, a chef, and his wife also face worries. The couple bought a 5-acre residential parcel in Pahrump 10 years ago for $10,000. About two months ago, they sold the property for $128,000. They relied on Southwest Exchange to handle their money so they could do a tax-free exchange. They found a condo in Las Cruces, N.M., they wanted to buy.

Now Mal worries that he has lost the money.

"It's a lifetime savings," Mal said.

Mal and his wife are both employed. But he said, "Right now, I'm in the gutter."

The Real Estate Division has received 11 complaints about Southwest Exchange since Monday.