Buying a Small Part Of Something Big | NYT
Buying a Small Part Of Something Big
By VIVIAN MARINO
15 October 2006
The New York Times
SUPPOSE you acquired an apartment or office building a few years ago. Chances are, if you bought in the right market, you've watched that property appreciate in value while amassing a steady stream of rental income.
Now it's time to sell -- perhaps you received an offer you can't refuse, or you have grown weary of playing landlord -- and you are facing a big capital-gains tax. Under current tax law, you can avoid the bill, or at least defer it, by rolling over the proceeds from the sale into a property of similar or greater value. But the rules say a replacement asset must be chosen within 45 days and closed on within 180 days.
One solution for the time-pressed investor is a tenant-in-common program, an increasingly popular investment that offers fractional ownership of commercial real estate, from apartments to factories. TIC's, derived from English common law, are structured so that investors -- up to 35 per deal are allowed -- are direct owners of real estate, enabling individual investments to qualify for these ''like kind'' exchanges under Section 1031 of the federal tax code.
They are attractive because investors get a chance to own part of a property that would otherwise be out of their reach. Independently managed, the properties provide income through cash flow from tenants.
Billions of dollars have poured into TIC’s since 2002, when the Internal Revenue Service clarified their status for Section 1031 exchanges. Last year, sponsors of TIC’s sold around $7.2 billion worth of properties to investors, according to Omni Brokerage of Salt Lake City, more than the nearly $7 billion sold in the previous four years, 2001 through 2004. (Equity in TIC buildings was $3.2 billion last year alone, after totaling $3.05 billion for the four previous years combined... )
By VIVIAN MARINO
15 October 2006
The New York Times
SUPPOSE you acquired an apartment or office building a few years ago. Chances are, if you bought in the right market, you've watched that property appreciate in value while amassing a steady stream of rental income.
Now it's time to sell -- perhaps you received an offer you can't refuse, or you have grown weary of playing landlord -- and you are facing a big capital-gains tax. Under current tax law, you can avoid the bill, or at least defer it, by rolling over the proceeds from the sale into a property of similar or greater value. But the rules say a replacement asset must be chosen within 45 days and closed on within 180 days.
One solution for the time-pressed investor is a tenant-in-common program, an increasingly popular investment that offers fractional ownership of commercial real estate, from apartments to factories. TIC's, derived from English common law, are structured so that investors -- up to 35 per deal are allowed -- are direct owners of real estate, enabling individual investments to qualify for these ''like kind'' exchanges under Section 1031 of the federal tax code.
They are attractive because investors get a chance to own part of a property that would otherwise be out of their reach. Independently managed, the properties provide income through cash flow from tenants.
Billions of dollars have poured into TIC’s since 2002, when the Internal Revenue Service clarified their status for Section 1031 exchanges. Last year, sponsors of TIC’s sold around $7.2 billion worth of properties to investors, according to Omni Brokerage of Salt Lake City, more than the nearly $7 billion sold in the previous four years, 2001 through 2004. (Equity in TIC buildings was $3.2 billion last year alone, after totaling $3.05 billion for the four previous years combined... )
posted by Patrick Leblanc at 5:23 PM
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