Instead of selling investment property, and owing tax, you can enter into a tax-deferred exchange for another investment property. To defer tax:
- replacement property must be identified within 45 days; and
- a new property must be acquired within 180 days.
The time limits may force you to rush into a poor investment. Moreover, exchanging one investment property for another may not reduce the amount of time you devote to management.
Alternatively, you can exchange your investment property for a tenants-in-common interest in a larger property. This will relieve you of management responsibilities.
As an owner of a TIC interest, you’ll share in any profits, losses, or cash flow. If you are one of 20 equal owners, for example, you’d get 5 percent of any cash distributed to the owners.
Nevertheless, if you decide to sell (and pay the deferred tax bill), you can cash out, regardless of what your co-owners do. To find TIC offerings, contact the Tenant In Common Association (or Omni Brokerage (www.omni1031.com).
