Were You Bilked on a Tax Deferred TIC 1031 "Real Estate" Investment (Actually an Illegally Sold Security)?
TIC or Tenant-in-Common" is a form of ownership of property whereby there can be multiple owners who have unequal shares. Any property can be owned in this way, including real estate. Section 1031 of the Internal Revenue Code allows investment property owners to defer the capital gains tax that would otherwise be due on investment properties sold, if the proceeds are used to purchase new property in a specified time frame. This is called a "1031 Exchange."
To facilitate such exchanges, investment property owners deposit the proceeds from the sale of their property with qualified intermediaries and sign exchange agreements, which include promises by the intermediaries to clients regarding the safekeeping of exchange funds in trust. In other words, investors money is held by a third party, who is expected to be honest and trustworthy. Human nature being the way it is, that does not always appear to be the case.
In the run up to the real estate market melt down, thousands of investors nationwide were solicited to make TIC 1031 investments and those who did are now reaping the results of their investments, and most are not happy. Real Estate brokers who sold these investments made a pitch to investors that they would receive cash distributions similar to interest as long they owned the property and they could sell out at any time, usually at a profit; all tax deferred. Predictably, when the market tanked thousands lost everything on these dubious transactions.
Turns out these TIC investments were illegally sold unregistered securities and some of the major players have been charged with securities fraud by the SEC. Real Estate brokers are prohibited from selling securities without a proper securities license, and in the sale of securities, all material facts and risks must be fully disclosed. In many cases, this did not happen.
Call us at (858) 259-7790 or contact us online.
To facilitate such exchanges, investment property owners deposit the proceeds from the sale of their property with qualified intermediaries and sign exchange agreements, which include promises by the intermediaries to clients regarding the safekeeping of exchange funds in trust. In other words, investors money is held by a third party, who is expected to be honest and trustworthy. Human nature being the way it is, that does not always appear to be the case.
In the run up to the real estate market melt down, thousands of investors nationwide were solicited to make TIC 1031 investments and those who did are now reaping the results of their investments, and most are not happy. Real Estate brokers who sold these investments made a pitch to investors that they would receive cash distributions similar to interest as long they owned the property and they could sell out at any time, usually at a profit; all tax deferred. Predictably, when the market tanked thousands lost everything on these dubious transactions.
Turns out these TIC investments were illegally sold unregistered securities and some of the major players have been charged with securities fraud by the SEC. Real Estate brokers are prohibited from selling securities without a proper securities license, and in the sale of securities, all material facts and risks must be fully disclosed. In many cases, this did not happen.
Call us at (858) 259-7790 or contact us online.
