community property and tenants in common

Dear Steve,

As you have advised my wife and I will be holding title as two single member LLC's as tenants in common. My lender does not require a TIC agreement. Does the IRS require a TIC agreement? Is there anything else that I need to do to insure that the IRS will allow my 1031 exchange considering that my wife and I held title as community property in California and will now be holding title as tenants in common in Colorado?

 

Dear G:  No TIC agreement is required by us.  Remember tenants in common has many rights which are implicit in the ownership.  For instance: right to share possession, rights to share income, duty to protect the property, duty to share expenses, right to sell their share separately.  The big thing that tenants in common do not share is this:  If one owner wants to spend money on capital improvements and the other one does not then the dissenting co-owner cannot be forced into making unwanted improvements.  All of this will probably be non-issues for you two.  Finally selling as community property and buying as two single member LLCs is exactly what I recommend.  Are we handling your 1031x?  I hope so.  Sincerely,

Steve Hickox
Attorney / President

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