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On March 19, 2002 the IRS issued Rev. Proc. 2002-22. This authority outlines the parameters under which structured Tenant in Common (TIC) arrangements would be recognized as valid investment real property. This is important because TIC properties, properly arranged, can now be used as both replacement and relinquished property for purposes of section 1031. Everyone is familiar with the TIC concept. TIC just means co-ownership of real property. Properly arranged a real estate investor may now 1031x out of 100% ownership in relinquished property and 1031x into TIC (fractional) ownership in replacement property. The investor will receive a deed to their fractional share of the real estate. The replacement property will typically be a large shopping center, office building, industrial warehouse, etc. The replacement property, now owned by many TIC owners, will be professionally managed. While real estate from the IRS point of view TIC investments are securities from the SEC (Securities Exchange Commission) point of view. For this reason, the sponsors of TIC properties typically issue prospectus when offering TIC properties for sale. In the coming months and years, we believe that ownership of many large commercial properties will shift to the TIC form of ownership. Start looking for them. Contact us for further information. We are recommending to our clients that TIC properties be identified as back-up replacement property in their 1031x transaction. |
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