Tenancy-in-Common (TIC) and 1031 Exchanges

Practice Contact

Todd D. Keator
Tax Practice Leader
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View Tenancy-in-Common (TIC) and 1031 Exchanges

Thompson & Knight is one of the largest firms in the U.S. handling tenancy-in-common (TIC) syndications. We represent some of the oldest and the newest sponsors in the rapidly growing TIC industry. Our Firm resources enable us to facilitate deals efficiently and to provide value, responsiveness, and proactive communication to our clients. Our multi-disciplinary team of tax, securities, finance, and real estate attorneys has the knowledge and expertise to assist our clients in entering and developing the TIC marketplace. More than 15 of our attorneys routinely handle TIC matters for sponsors and can provide both efficiency and prompt turnaround in the TIC industry.

Our attorney team has the ability to handle all details of a transaction - or work separately on different issues, including:

  • Tax and tax opinion work;
  • Real estate, loan, property, and opinion work;
  • Securities and private placement memoranda work;
  • Oil and gas; and
  • Litigation.

A tax-free exchange, under Section 1031 of the Internal Revenue Code, allows a property owner to transition from one parcel of real estate to another parcel of equal or greater value and to defer income taxes if certain requirements are met. This type of transaction is called a "like-kind exchange" or a "1031 exchange," which refers to the Internal Revenue Code Section that governs such transfers. Exchanges are not necessarily complicated, but certain rules must be followed to qualify for tax deferral.

Originally, Section 1031 exchanges required the actual transfer of one piece of property for another. Regulations now allow for a "deferred" exchange, which is the most popular means of making such an exchange. A deferred exchange allows a property owner to sell a parcel of real estate and then, within certain time constraints, find another parcel of real estate and use the proceeds from the sale of the first parcel to buy the second parcel. The funds from the first sale cannot be received by the owner, but must be deposited with a "qualified intermediary" until replacement property can be found.

For the exchange to qualify for tax deferral, the replacement property must be "like kind" property. But it need not be identical. For example, farmland can be exchanged for residential real estate, and residential real estate can be exchanged for commercial real estate. Further, you can sell property and build a new property to replace it if the building can be completed within 180 days after closing the original sale. You can rely on T&K attorneys to assist you with all aspects of TIC syndications and 1031 exchanges.