Syndicated Tenancy-in-Common Arrangements: How Tax Motivated Real Estate Transactions Raise Serious Non-Tax Issues
by Bradley T. Borden and W. Richey Wyatt |
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Reprinted with permission from
Probate & Property September/October (American Bar
Association). Copyright (c) 2004 American Bar
Association.
Some real estate syndicators have
added tenancy-in-common ("TIC") interests
to their traditional offerings of limited partnership
interests. A TIC interest allows an investor to acquire
an undivided interest in the underlying property
instead of buying an interest in an entity that owns
the property. The primary driving force behind this
trend is property owners' need for replacement
property to complete tax-free exchanges under
Section 1031 of the Internal Revenue Code
(the "Code"). Code Section 1031 allows property
owners to reinvest proceeds from the sale of real
property in other real property, but not in a
partnership interest. Although this is the primary
motivation for syndicating TIC arrangements,
syndicators are finding that investors will invest cash,
other than Code Section 1031 exchange proceeds, in
TIC arrangements, because syndicators promise
higher rates of return than investors have recently
been able to find in the stock and bond markets.
While the TIC industry now includes a diverse cross-
section of investors, because TIC arrangements
almost always involve Code Section 1031 exchange
proceeds, technical requirements must be satisfied in
order to obtain the tax results required by the Code
Section 1031 investors. Also, because these
arrangements involve real estate being owned by
multiple owners, they raise many non-tax issues that
must be considered along with the tax issues.
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| Aaron Leff Joins the CapHarbor Team |
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CapHarbor is pleased to welcome
Aaron Leff as the newest member of our team. Aaron
will initially work as an analyst, supporting both out
client development and production teams. Aaron is a
recent graduate of Lehigh University in Pennsylvania,
where he earned a degree in economics (the science
of knowing the cost of everything and the value of
nothing). Aaron joins CapHarbor with experience in
the residential real estate lending market, having
worked for WMC Mortgage (a subsidiary of GE
Capital) for the past two years. While at WMC,
Aaron worked with the sales and production
department with a focus on business development,
including managing the production pipeline for one of
the company's top representatives.
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| Current Events |
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TICA's 2nd Annual Conference
October 5-7
Venetian Hotel
3355 Las Vegas Boulevard South
Las Vegas, NV 89109
Visit the TICA
Website for More Information
FEA Annual Conference
October 7-8
MGM Grand Resort and Casino
3799 Las Vegas Boulevard South
Las Vegas, NV 89109
Contact FEA Headquarters for More Information:
FEA Headquarters 215-564-3484
fea@fernley.com
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