TIC 1031 Exchange is a form of real estate asset ownership in which two or more persons have an undivided, fractional interest in the asset, where ownership shares are not required to be equal, and where ownership interests can be inherited. Each co-owner receives an individual deed at closing for his or her undivided percentage interest in the entire property. A TIC owner has the same rights and benefits as a single owner of property. These can be either a privately negotiated transaction between investors or may be a syndicated tenancy in common where uniform set of terms and conditions apply to any and all investors. Many syndicated TICs are treated as securities under federal security law.
If you are interested in investing in larger scale investment grade investments that are professionally managed, such as shopping malls, office buildings, corporate headquarters and apartment complexes, these exchanges may be the way to invest in such properties. Ownership in common stock in REITs does not qualify for 1031 exchanges.
If you are no longer interested in actively managing your real estate investments, yet desire to continue to invest in real estate type investments, and do not wish to pay income taxes on taxable gains on the sale of your existing real estate investments, TIC investments are for you.
Revenue Procedure 2000-37 provides guidelines as to the suggested terms and conditions for this type of investment. Should the investment not conform to these guidelines, the investment maybe treated as a tax partnership. This may result in the 1031 exchange being denied.
These investments need to be carefully scrutinized for various financial and tax risks. Furthermore, these investments are generally illiquid and individual investors lack control or direction over the management of the investment.
If you are selling investment or business real estate and no longer desire or are able to manage or maintain your investment or business real estate, an investment in a Tenant in Common investment may be attractive to you. The Tenancy in Common Manager oversees the investment and distributes your share of net income on a periodic basis.
Call our office at (513) 412-3481 or toll free at (800) 427-7212. Our Exchange coordinators are ready to discuss whether this type of exchange is right for you and how to get started. You may want to have your project details handy when we discuss your potential TIC Exchange.