Mostly, people that make TIC (tenant in common) investments will have 1031 exchange in mind and even though TIC as an industry is just a small part of 1031 market, it is still increasing at a good rate and thus worthy of serious consideration. At present, TIC can be brokered either as a securities or real estate transaction and thus there is a grey zone that exists with regard to whether Tenant in Common is Securities or Real Estate.
Securities Or Real Estate Dealers/Brokers
There are a few organizations such as the National Association of Realtors (NAR) that are concerned about whether TIC that is in the form of a partnership or security, or both, will be disqualified under 1031, and furthermore such disqualification will in turn require using security dealers/brokers for security transactions and not real estate brokers because the transactions are not deemed as being real estate deals.
In fact, to be sure about whether Tenant in Common is Securities or Real Estate you need to understand what security is and what real estate means. Typically, securities involve investing money or other form of property, and investing in common enterprise based on a third person’s expertise and the intention is to earn a profit. However, there is no real clarity when it concerns Tenant in Common: Securities or Real Estate though for any TIC transaction to be qualified as 1031 tax deferral, it requires that the National Association of Securities Dealers or NASD has to step in to evaluate the TIC industry and then shed further light on whether Tenant in Common are Securities or Real Estate.
What it thus boils down to is that, as far as Tenant in Common: Securities or Real Estate is concerned, if the TIC transaction is deemed to be one of security then the deal has to be brokered through securities dealer/broker and there is no place for a real estate broker in such instances. On the other hand, when Tenant in Common: Securities or Real Estate relates to a real estate TIC exchange, then the deal has to be brokered through real estate brokers/dealers and there is no place for the securities dealers/brokers.
As a matter of fact, when trying to decide whether Tenant in Common are Securities or Real Estate it is really quite difficult trying to figure out what is security and what is real estate, especially as the matter is further compounded because there is nothing clearly mentioned in the Revenue Ruling, or Revenue Procedure in this regard. Thus, depending on who is viewing the TIC, deciding on Tenant in Common: Securities or Real Estate depends on whether the NASD is handling the matter and if so, it will treat the TIC as securities while, if it were the NAR, then the TIC would definitely be considered as real estate.
Gary K. Landry is the CEO of TIC Advisors, Inc. If you are looking for the most complete information on a 1031 exchange or TIC property ownership, then you should visit one of the TIC Advisors, Inc. websites: http://www.tic.com and [http://www.ticadvisors.com]
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