Tenancy-in-common


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Tenancy in Common

A way for two or more persons to own property together. Tenants in common may own equal or unequal shares of the property, and there are no rights of survivorship. That is, when one of the co-owners dies, his/her share of the property becomes part of his/her estate and passes on to heirs. This is an arrangement common in joint business ventures: if two persons own an apartment complex and one of them dies, his/her share of the complex passes to his/her beneficiaries and does not pass to the other co-owner.

Tenancy-in-common.

When two or more people own property as tenants-in-common (TIC), they share in the property's tax benefits, any income it generates, and its growth in value, as well as expenses of ownership.

If one owner dies, that owner's share of the property becomes part of his or her estate, to be sold or distributed among heirs as the owner instructs.

TIC arrangements are a popular way to structure the ownership of real estate investments, in which two or more parties buy commercial property to generate income. However, siblings might also own family property in this way, as might business partners.

References in periodicals archive ?
And since no separate taxable entity is created, if an owner sells a tenancy-in-common undivided fractional interest in the property, the interest sold may qualify as eligible relinquished property under Sec.
Holding real estate as a partnership is more complicated and expensive than joint tenancy or tenancy-in-common. Because a partnership is a separate legal entity, you'll have to draft a partnership agreement, file various documents with the state, and file annual partnership income tax returns.
The Internal Revenue Service, in its Revenue Procedure 2002-22, set forth the following guidelines on what constitutes an official tenancy-in-common. To read the guidelines in full and for more specific information, visit: http://www.irs.gov/pub/irs-drop/rp-02-22.pdf.
The leading candidates for an FTB audit are those where the ownership is changed from a partnership to a tenancy-in-common only a few minutes or hours before its disposition.
2002-22 offers guidelines for structuring tenancy-in-common ownership of relinquished property for the period before completion of the exchange.
2002-22, tenancy-in-common co-ownerships should not (1) file a partnership tax return, (2) conduct business under a common name, (3) hold themselves out or identify themselves as partners, by agreement or otherwise and (4) indicate to third parties that they are conducting their real estate activities as a partnership.
2002-22 requires each co-tenant to retain the right to approve the major decisions of the tenancy-in-common. Further, each co-tenant must have the right to approve the hiring of any manager and the sale, disposition or lease of the property, or creation of a lien.
Using disregarded entities to own a tenancy-in-common: Persons owning tenancy-in-common interests in the replacement or relinquished property may want to limit their personal liability exposure by owning such interests in a disregarded entity's name, such as a single-member LLC, rather than in their individual names.
Distributing tenancy-in-common interests: Another alternative is to have the partnership distribute a fractional tenancy-in-common portion of the relinquished property to the cash-out partners in redemption of their partnership interests.
The Revenue Procedure, viewed as a safe harbor, provides a relatively conservative set of standards that must be met to obtain a private letter ruling from the IRS that an arrangement qualifies as a tenancy-in-common (TIC).