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tenant in common (TIC)
What is TIC - 1031 TIC Exchanges?

1031 TIC Exchanges are a form of real estate asset ownership in which two or more persons have an undivided, fractional interest in the asset, where ownership shares are not required to be equal, and where ownership interests can be inherited.



Terminology

Like-Kind Property

Like-Kind refers to the type of property being exchanged. You can exchange any real estate investment for any other type of real estate investment - for example, vacant land can be exchanged for rental property. In most cases your personal residence is not Like-Kind investment property.

Exchanging Up

To accomplish a fully tax-deferred exchange, the rule of thumb is "exchange even or up in value; exchange even or up in equity and in debt."

Boot

To the extent that you do not exchange even or up in value and/or exchange even or up in equity and debt, you will have received non-qualifying property ("boot") in your exchange. If boot is received, tax is computed on the amount of gain on the sale or the amount of boot received - whichever is lower.

Typical Exchange Addendum Language for Sales Contracts "Buyer hereby acknowledges that it is the intent of the Seller to effect an IRC Section 1031 tax deferred exchange which will not delay the closing or cause additional expenses to the Buyer. The Seller's rights under this agreement may be assigned to a Qualified Intermediary, named by Seller, for the purpose of completing such an exchange. Buyer agrees to cooperate with the Seller and the Qualified Intermediary in a manner necessary to complete the Exchange"

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