There are some very exciting things happening in the Real Estate and 1031 exchange area. Particularly in regards to the syndicated tenant in common (TIC) programs. The TIC programs allow certain investors to purchase a real property interest in large grade A commercial property. In most cases, these interests qualify as replacement property in a 1031 exchange.
In 2002, the Internal Revenue Service issued Revenue Procedure 2002-22, providing:
1. Guidelines for requesting advance rulings to assist taxpayers in preparing a ruling request on a specific structure and proposed transaction.
2. Conditions present in the proposed TIC structure under which the IRS normally will consider a request for a ruling.
These guidelines and conditions constitute requirements for advance rulings and are the clearest set of principles the IRS has set out as to its thinking on TIC programs.
TIC properties can provide investors engaged in a 1031 exchange a viable alternative to replacement properties, especially if they arer having a difficult time meeting the 45 day Identification Period. They are also great opportunities for investors to diversify their real estate portfolio.
Most TIC interests are sold as securities under Reg D, which provides that the investor must be accredited ($1,000,000 net worth or annual income of $200,000) in order to purchase them. The fact that they are securities affects real estate agents because the rules regulating securities broker/dealers and their registered reps prevents them from compensating real estate agents for their client referrals.
In 2007, the National Association of Realtors petitioned the Securities and Exchange Commission for an exemption to these rules, which would permit financial advisors to compensate commercial real estate agents for their client referrals to TIC deals.
As with all investments, investors need to evaluate the risks and benefits of each investment.
For more information regarding the Tenant-In-Common industry, check out this link to the Tenant In Common Association http://www.ticassoc.org/.
The information provided is for educational purposes only. It is not legal or tax advice. Accordingly, the taxpayer should review the details of the specific transaction with taxpayer's own legal or tax advisor.
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