IRC Section 1031 Tax-Deferred Exchanges

Tight deadlines limit a property owner's ability to use an IRC section 1031 exchange to defer taxes on gains. Taxpayers running up against these deadlines can gain some flexibility by using tenancy-in-common interests (TIC) as replacement property. TICs are typically marketed as vehicles that provide the rewards of real estate investment without the burdens of day-to-day property management. TICs allow individual investors to join together to purchase a property larger than any one of the individuals could buy on his own. Each TIC investor owns a fractional interest in the TIC property and is entitled to cash flow and tax benefits from the property in proportion to the individual's investment. Three types of parties are involved in a TIC transaction: a sponsor, a broker/dealer, and the TIC investors. TIC offerings are limited to 35 accredited investors. A TIC is real property, so the burdens of real property ownership apply.