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Although, as a result of the 2002 IRS ruling, TIC's are real estate for 1031 Exchange purposes, there is much controversy regarding whether, for offering and sale purposes, TIC's are real estate or securities. We know that
stocks and bonds are securities, but why fractionalized interests in real
estate? That is precisely the argument of those who are on the "real estate side" of the argument who do not believe that TIC's should be categorized as securities.
However, "investment contracts"
are also considered to be securities.
An investment contract is where you and others contribute money to a
joint enterprise and the promoter promises to make you money. A TIC is a passive
investment where the return on your investment, the return of your investment
and ultimate profit on your investment is in the hands of the sponsor. This explains the "securities side" of the debate.
Also, if TIC's are real estate, licensed real estate brokers can receive commissions on their sale, but a securities license is required to sell TIC's and receive commissions if you agree with the securities side of the debate. However, since the sponsor normally pays the commission whether the sponsor comes down on the real estate side or securities side, the debate is mostly academic to a TIC investor, except that the disclosure documents for securities TIC's, which are regulated by rules of the Securities Exchange Commission (SEC), are generally considered to more extensive and the format more standardized.
1031Replace.Com does not deal in real estate TIC's, but only in securities TIC's. Generally, securities TIC's are structured as direct private placement securities (DPP's) under "Regulation D". The disclosure document provided by the
sponsor is called a Private Placement Memorandum (PPM) and must be made
available to the TIC investor before the TIC investor is allowed to make a
purchase. Also, TIC investors must be "Accredited Investors" as defined by the applicable securities laws and regulations which means for individuals either net worth of $1,000,000 or $200,000 income for each of the last two years ($300,000 for a married couple). There are other net worth requirements for
irrevocable trusts, partnerships, corporations and other entities (see Net
Worth Requirements). 1031Replace.Com can help you navigate the
rules and paperwork to successfully complete your 1031 Exchange into one or
more TIC replacement properties. TIC
Securities offered through OMNI Brokerage, Inc., member NASD/SIPC.
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