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Ecology of Money

Tenants in Common Real Estate Deals: Do They Make Sense?

TICs can lessen the tax burden for real estate investors, but these deals should be put through their paces first.

Is there a way to sell properties you own and put the proceeds in a vehicle to avoid capital gains? Tenants in common deals, also known as 1031 TIC property exchanges, have promised such a loophole, although many of them may not make sense now.

A combination of the real estate boom and the tax-free exchange benefit pushed TIC sales from $150 million past $2 billion, according to FINRA, the securities industry regulator. Yet due to the depressed real estate market and possible misrepresentation by sponsors, many of these deals are coming under scrutiny. A few have been the subject of arbitration claims against brokers selling them.

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