Source: http://1031fec.com/1031-721tic.html
Timestamp: 2019-04-19 10:52:06+00:00

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IRS (Internal Revenue Service) IRC (Internal Revenue Code) § 1031, and § 1033 real property exchanges and stock exchanges remain popular for tax-deferral. If needed two to eight owners of single property can allow owners to purchase larger more secure leased real estate.
§ 1031 Premium Exchange - What is a Tenants-In-Common Investment (TIC)?
Tenant in Common is a form of holding title to real property. It allows the owner/owners to own an undivided fractional interest in the entire property. In addition, it has become the preferred investment vehicle for real property investors who wish to defer capital gains via a § 1031 exchange and own real property without the management headaches. Most of 1031FEC replacement properties are zero debt with less than 10 owners. The 1031FEC occasional debt TIC has less than 10 TIC owners.
IRS § 721 ("721 Exchange") allows a Taxpayer to exchange rental or investment real estate ultimately for shares in a Real Estate Investment Trust (REIT). This is called a §721 exchange, also known as an upREIT or §1031 / 721 exchange. Your 1031 FEC Consultant can advise in detail for your personal portfolio.
An Umbrella Partnership Real Estate Investment Trust or UPREIT implements the use of both The Internal Revenue Code Section § 1031 and § 721. In an UPREIT structure, the investor executes a 1031 exchange TIC into one property in which he/she will co-own for about 12-18 months. At that time the investor will implement a § 721 exchange in which he/she will contribute a property to a partnership. At this point the investor receives interest in the partnership called operating partnership units (OP units). § 721 exchanges are often used by real estate investment trusts (REITs), which typically own all or substantially all of their assets through a subsidiary partnership with the REIT acting as general partner.
In a § 721 exchange or UPREIT structure, rather than taking possession of another property, the investors receive OP units that carry the economic benefits of the REIT’s entire portfolio, including any capital appreciation and distributions of operating income. OP units can be converted later into shares of the associated REIT, and may only be taxable when such a conversion or liquidation takes place.
IRS § 1031 and §721 TIC exchange investments are structured to defer capital gains and recapture of depreciation taxes in accordance with 1031 exchange requirements.
No Closing Costs - Some property investments include closing costs. Be sure of all costs in a purchase or exchange. Absent seller default or other items outside the control of 1031 FEC, closings are generally within the agreed upon time frame. 1031 FEC does not charge the TIC owners closing costs. Non-FEC 1031 triple-net Master Lease transactions generally result in client closing expenses. 1031 Qualified Intermediary fees are paid by the buyer/exchanger.
Deeded Interest - The Premium TIC owners buy the property and receive a deeded interest. You can transfer this interest by gift, sale, inheritance, assignment, etc. Such transfer does not need to coincide with the transfer of all TIC interests in the property. If requested to do so by the TIC owner, 1031 FEC will assist in the marketing of any TIC interest.
No Fee to 1031FEC 1031 Exchanger Client. Fee paid by 1031 real estate property provider.
Does your property qualify for this tax break? For a no fee confidential consultation and for more details contact 1031FEC. We also can find if you qualify for a retirement tax deduction up to $100,000 for you and up to $100,000 for your spouse. We recommend your tax advisor or CPA be invited to consult and confirm details.
One can avoid paying tax on more than $500,000 of gain on one's home. Many people are aware of the advantages of Internal Revenue Code Section 121, which allows a married couple to exclude up to $500,000 of gain on the sale of their personal residence ($250,000 for a single taxpayer). Although this amount of gain is generous in most areas of the country, in some states homeowners receive more than $500,000 of profit when they sell their home. That additional profit is subject to federal and state capital gains tax and net investment income tax (Medicare tax).
What is much less understood in the real estate world is that a homeowner can avoid paying all of the tax on their home by converting it to a rental. Once the home is converted to a rental, the owners can sell it and use both the Section 121 exclusion of gain and the Section 1031 deferral of gain provisions to exclude some of the gain and defer paying tax on the rest. Most tax advisors recommend renting the home for at least two years to establish it as a rental, but if you rent it for too long, you could lose the ability to benefit from the Section 121 exclusion, since that provision requires that you have lived in the home as your primary residence at least two of the past five years.
Bob and Sue Smith have lived in their home for twenty years. They acquired it for $100,000 and it is now worth $1 million, so if sold, they would have $900,000 of gain. If they sell it without converting it to a rental, they would be able to exclude $500,000 of gain but would have to pay capital gains tax on the additional $400,000 of gain.
Bob and Sue decide, however, to convert their property to a rental. After renting it for two years, they sell it for $1 million. Since they used the home as their primary residence at least two of the past five years, they are able to exclude $500,000 of the gain. They can then use the remaining funds to acquire replacement investment property in a 1031 exchange and defer paying tax on the balance of the gain. In order to accomplish this, they must set up the 1031 exchange prior to closing on the sale of the property.
In order to completely defer the remaining gain, the traditional rule is that the investor must acquire replacement property with a fair market value equal to or greater than the relinquished property, and must invest all of the equity from the relinquished property into the replacement property. When gain has been excluded under Section 121, however, the amount of value and equity required to invest in the replacement property is reduced by the amount of gain that was excluded under Section 121.
Homeowners who decide to combine a sale of their primary residence with a 1031 exchange need to comply with all of the rules of Sections 121 and 1031 in order for this to work. Revenue Procedure 2005-14 explains how the two statutes may be combined for one property. This ruling includes not only the situation mentioned above, but also a sale of a personal residence with a home office or separate guest house that is rented.
To take advantage of the deferral of gain under Section 1031, the property you sell and the property you acquire must at the time of the exchange be used in connection with your business or held for investment.
Contact 1031FEC for more information.

References: § 1031
 § 1033

§ 1031
 § 1031
 § 721
 §721
 §1031
 § 1031
 § 721
 § 721
 § 721
 § 721
 § 1031
 §721