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On January 14, 2009, the Securities and Exchange Commission delivered a “no action” letter that could require Tenant-In-Common (TIC) interests to be offered to investors as securities instead of partial ownership interests in real estate. This change would subject the sale of TIC interests to the same stringent state and federal laws applicable to sales of securities.  
 
A properly structured TIC allows individual investors to collectively own a large piece of property, while often utilizing professional management services, and also preserves the investors’ ability to utilize tax-deferral on an exchange of that property under Section 1031 of the Internal Revenue Code. Because of this advantage, TIC ownership structure has become increasingly popular among real estate investors in recent years.
 
The application of securities laws would likely affect the manner in which sponsors offer TIC interests in the future, and because most TIC offerings completed in recent years did not comply with securities laws, investors in failed or troubled TIC investments may now have ammunition to recoup some of their losses. We will track the development of these issues.

CIRCULAR 230 DISCLOSURE
THE DISCUSSION OF TAX CONSIDERATIONS WAS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY ANY TAXPAYER, FOR THE PURPOSE OF AVOIDING TAX PENALTIES THAT MAY BE IMPOSED BY THE INTERNAL REVENUE SERVICE.  ANY TAX ADVICE CONTAINED HEREIN WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED BY THE WRITTEN ADVICE. EACH PARTY SHOULD SEEK ADVICE BASED ON THE PARTY’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

 

 

 

 

 

 

 

 

 
 
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