- MEET THE FIRM
- OMNI BROKERAGE
- PROPERTIES
- TENANT-IN-COMMON
- 1031 EXCHANGE
- DUE DILIGENCE
- RESOURCES
- WORKSHOPS
- GLOSSARY OF TERMS
- CONTACT
GLOSSARY OF TERMS R – Z
Real Estate vs. Securities
The offering of undivided interests in real estate, where the Sponsor sources the property and provides ongoing services with the expectation of profits, meets the definition of an offering of securities in the nature of an investment contract. A TIC interest is a deeded fractionalized interest in real estate, and as such is capable of satisfying 1031 exchange rules. However, when undivided interests in a single property are offered to multiple owners and a Sponsor is sourcing the real estate and providing ongoing services for an expectation of profit, the TIC interest generally meets the definition of an investment contract and is subject to federal and state securities laws and rules of distribution to investors.
Real Property
In general, land and everything growing on it, attached to it, or erected on it. Examples of real property are single-family rental houses, apartments, shopping centers and office buildings.
Recapture
The amount of tax to be paid on the difference between book value after depreciation deductions and sales price. The tax rate on recapture is currently 25%.
Recourse
The right of a lender or holder of a note secured by a mortgage to look to the personal assets of the borrower or endorser for payment should they go into default, not just to the property assets.
Reg D Offering
A safe harbor exemption for TIC investment offerings where participating investors must be qualified as Accredited Investors. This is the most frequent type of TIC investment offering used by TIC Sponsors.
Registered Securities Broker/Representative
An individual who recommends, offers or sells investments in return for a commission. A registered securities Broker/Representative must be associated with a Broker Dealer and licensed as a securities professional with the SEC, the FINRA and all states in which he conducts business. Any unlicensed individual or firm involved in recommending, offering or selling TIC investments is in violation of federal and state securities laws.
Relinquished Property
The property sold by the Exchanger. This is sometimes referred to as the "exchange" property or the "downleg" property.
Replacement Property
The property acquired by the Exchanger. This is sometimes referred to as the "acquisition" property or the "upleg" property.
Revenue Procedure 2002-22
On March 19, 2002, Revenue Procedure 2002-22 was issued providing guidance regarding the conditions under which the IRS will entertain a private letter ruling that a TIC interest will not be treated as a partnership interest for tax purposes. The guidance clarifies the criteria which the IRS views as distinguishing a real estate TIC arrangement from a partnership, and enables Sponsors to create rental real estate structures that have ownership units capable of being used in a like-kind exchange.
Sponsor
A real estate provider that sources the investment property, garners the financing and manages the assets for the owners. Sponsors provide the service of packaging the investment property into a TIC format, allowing fractional undivided interests in one property to be sold to multiple co-owners as TIC interests.
Syndication
1) A combining of persons or firms to accomplish a joint venture of mutual interest. 2) The process of acquiring and combining equity investment from multiple sources.
Tenant-In-Common (TIC)
As a TIC owner, you have an undivided fractional interest in an entire property and share in your portion of the net income, tax shelters, and appreciation. Each TIC owner receives a separate property deed and title insurance for their portion in the property investment. This gives you the same rights of ownership that a single owner would enjoy.
TIC Distribution Process
A real estate provider sources an investment property and prepares an investment offering through a PPM. Broker Dealers conduct due diligence on the investment offering and execute an agreement to sell the TIC investment to qualified investors through its registered securities Brokers/Representatives. A cooling off period is then recommended allowing registered securities Brokers/Representatives and investors sufficient time to review the PPM and make a determination of the merits of the investment offering. Interested Investors then submit applications to participate in the TIC investment through their registered securities Brokers/Representatives and Broker Dealers to the Sponsors.
