Trade Talk
By Doug Ruby, CES
What is a TIC?
“TIC” simply stands for “Tenancy In Common”. A TIC allows an exchanger to invest exchange proceeds into a partial share of a large commercial property, often managed by someone else. The use of TIC’s as replacement property is growing in popularity since many TIC investments offer regular income with little or no management responsibilities. Securities brokers represent many TIC properties, so most TIC sales cannot offer commission to Realtors®. However, Realtors® may want to inform clients about this option, especially if they are having trouble finding replacement property in time. Contact Summit for more information on potential strategies involving TIC’s.
Calculating Basis…
Basis is the value assigned to a taxpayer’s investment in a property. It is used to compute gain or loss. Basis is calculated by taking the original purchase price, subtracting depreciation, and adding the value of any capital improvements. Taxable gain is then determined by subtracting basis from the net sale price of the property. Federal tax on long-term gain is generally 15%, while state income taxes can range from zero to as high as 11%. However, different rates are applied when depreciation and short-term gains get involved, so ask your CPA or accommodator to help you with the right tax rates for your individual situation.
Doug Ruby is Vice President of Summit Accommodators, Inc., and leads the Austin, TX office. Doug was one of the first FEA designated Certified Exchange Specialists®, and has been working in the real estate industry for over 10 years. Doug can be reached via e-mail at austin@summit1031.com