Below are common questions asked about Tenants in Common, qualification requirements for TIC investments and the time frame for completing a Tenants in Common Investment.
At Corcapa 1031 Advisors, we provide guidance and help investors find the best 1031 exchange replacement property to complete a successful tax deferred exchange. Contact us and a 1031 Exchange specialist can review and help build your real estate portfolio. – (949) 722-1031.
What is a Tenants in Common Investment?
Tenants in Common (TIC) became popular in 2002 after the IRS issues Revenue Ruling 2002-22 governing the needed structure of TIC real estate. In a TIC structure an investor owns an undivided fractional interest in real property and shares pro-rata in all the expenses and income of the property as well as depreciation benefits. TIC investors receive a recorded deed for their fractional interests in the property. 1031 exchange investors may find suitable replacement property in the form of TIC ownership.
Tenants in Common offerings are often pre-arranged with financing allowing for a simpler and faster closing of 1031 exchange replacement property.
The acronym “TIC”, which stands for tenancy in common and tenants in common, refers to arrangements under which two or more people co-own a parcel of real estate without a “right of survivorship”. This type of co-ownership allows each co-owner to choose who will inherit his/her ownership interest upon death. By contrast, the type of co-ownership called “joint tenancy” requires that each co-owner’s interest pass to the other co-owners upon death.
Are You An Accommodator?
While Corcapa is happy to refer you to accommodators, we cannot provide accommodator/Qualified Intermediary services. We specialize in the replacement properties for our clients’ 1031 exchanges.
What are the deadline dates to complete a successful 1031 Exchange?
To accomplish a full tax deferral on the sale of rental property you must follow the IRS Section 1031 Guidelines. Corcapa 1031 Advisors recommends the following:
- Be in communication with your Corcapa 1031 Advisor representative well ahead of your proposed relinquished property closing so we can begin to research and identify potential replacement property.
- Be sure to select and assign a Qualified Intermediary “QI” or Accommodator to receive the sale proceeds from escrow. Corcapa can recommend QIs for you. Be sure to research the financial backing of QIs before selecting them. Be especially careful to NOT take personal receipt of the funds or your exchange will be invalidated.
- From the day you close your relinquished property, you will have 45 days to identify your replacement property(ies) and can use one of three rules: The three property ID rule, the 200% rule, or the 95% rule.
- You have an additional 135 days from the end of the 45 day period in which to close on your replacement property(ies).
- Additionally, for full tax deferral you must purchase equal or greater purchase price, equal or greater debt and reinvest all cash.
Will a TIC or DST Qualify for a 1031 Exchange?
The Revenue Ruling 2004-86 issued by the IRS governs how the DST should be structured so that the purchase of a DST will fit within the guidelines of a 1031 exchange. Corcapa works with sponsors of DST offering who structure the offerings with a legal opinion for 1031 exchange purchases. We recommend that you discuss this with your tax and legal advisors and we will provide all documentation to these advisors to use in analyzing your replacement property options. Further, we are not aware of any of our clients to have ever had an IRS tax issue with the purchase of a DST investment.
* All information provided on this page is time sensitive and subject to change.
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