|
TIC's are, of course, tenant in common fractionalized interests in real estate, and they qualify as replacement properties in 1031 Exchanges, including sponsored TIC's. Recently, however, IRS also approved Delaware Statutory Trust (DST) interests as replacement properties in 1031 Exchanges. So, some TIC sponsors are turning to DST's as the preferred method of packaging TIC's. The reason is that the sponsor does not have to form a separate limited liability company for each TIC investor but, instead, the investor receives an assignment of beneficial interest in the trust.
On a smaller scale, beneficial interests in land trusts (sometimes called "Illinois Land Trusts", but also used in other states) have long been recognized as qualified 1031 Exchange replacement properties, but there was concern that trusts like these and DST's might be treated as partnerships in the sponsored TIC area thereby disqualifying exchanges where they were used. Closings are simpler and closing costs are often less for TIC's packaged as DST's. We expect to see the trend continue towards DST structure, but the structure is better suited for some types of properties than others. Unlike TIC's, DST's are not limited to 35 investors.
|
