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Before the IRS ruling in 2002,
advisors were concerned the IRS would conclude that the TIC buyers had received an
interest in a partnership instead of real estate despite the fact the they
received their interest in the form of a deed
Such a ruling would have disqualified their exchanges and would have subjected
the TIC buyers to payment of the capital gains tax they thought they had
successfully deferred by the exchange. A
few, but not many, were willing to take the risk before, but after the 2002 IRS
ruling, the TIC industry began to expand geometrically to where it is today. In 2002, there were around 20 sponsors, but
by 2004 there were at least 50, and the list continues to grow. Most of the sponsors and/or their owners have
had extensive involvement in commercial real estate before entering the TIC business,
and for many sponsors the TIC business is just an extension of their existing
property acquisition, investment, syndication, management, etc. businesses.
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