Reviewing TIC Agreements in a 1031 Exchange

In a 1031 exchange involving tenants-in-common, it’s important to review the two tenants-in-common (“TIC”) agreements to make sure that they comply with 1031 as real property interests and are not by their terms creating a joint venture or partnership. In this article, we are going to provide a few resources for TIC guidance when conducting a 1031 exchange of real estate.

Reviewing TIC Agreements

Here are some authorities for your attorney to consider when reviewing a tenants-in-common (“TIC”) agreement to make sure it will not create a de facto partnership:

  • Rev. Proc. 2002-221 (the TIC guidance) Tenant in common: https://www.irs.gov/pub/irs-drop/rp-02-22.pdf

  • TIC interest constitutes a direct interest in real property, as opposed to an interest in a business entity (for example, a partnership).

  • Each co-owner should have the right to transfer, partition, and encumber the co-owner’s undivided interest in the property, without the agreement or approval of any person.

1031 exchanges involving TIC agreements can get complicated. It’s important to involve everyone on your 1031 exchange team (your attorney, qualified intermediary, and more) to ensure everyone is on the same page.

Consider a 1031 Exchange for Your Next Real Estate Transaction

Consider a 1031 exchange for your next real estate transaction. At CPEC1031, LLC we focus on providing top-tier 1031 exchange services to clients throughout the state of Minnesota and across the United States. We are standing by to help you through the details of your next 1031 exchange of investment real estate. Contact us today at our Minneapolis offices to set up a time to chat and learn more about how a 1031 exchange can help you save money!

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved