Tenant-in-common interests

A tenant-in-common arrangement, a TIC, lets multiple investors co-own a single property as true fractional owners, each holding title to an undivided interest. For 1031 purposes it is the older sibling of the Delaware statutory trust: another way to exchange into a share of a larger property, but with real ownership, real control, and real liability, where a DST gives you none of those. The difference between the two is one of the more important choices a fractional-ownership investor makes.

What a TIC is, and why it qualifies for 1031

In a TIC, each co-owner holds actual title to a percentage of the property as a tenant in common under state law. You own your fraction directly, and, critically, that fractional interest is treated as a direct interest in real estate, which is what makes it like-kind and eligible for a 1031 exchange. The tax code specifically excludes partnership interests from 1031, so the entire game is making sure a co-ownership arrangement is a TIC and not a disguised partnership.

The IRS drew the line with Revenue Procedure 2002-22, a safe harbor listing the conditions under which a co-ownership will be respected as a TIC rather than reclassified as a partnership. Because each co-owner owns real estate directly, each can independently 1031 into their TIC interest, and later 1031 out of it, on their own schedule, without the other owners. That independence is the TIC’s signature advantage over an entity structure.

A TIC gives each co-owner direct title to a fraction of the property, so each interest is real estate that can be exchanged in or out independently, unlike a partnership interest, which cannot.

The safe-harbor conditions that keep it a TIC

Revenue Procedure 2002-22 sets guardrails that preserve the passive co-ownership character. The most important: no more than 35 co-owners (a married couple counts as one), the co-ownership cannot file a partnership return or hold itself out as an entity, each co-owner holds title as a tenant in common under local law, and each retains the right to transfer, encumber, or partition their own interest.

The governance rule is the one that shapes the experience. Major decisions, selling the property, refinancing, signing or renewing a lease, hiring a manager, require unanimous approval of all the co-owners. Day-to-day matters can go by majority. Unanimity on the big decisions is what keeps the arrangement from looking like a centrally managed business, but it is also the TIC’s biggest practical weakness: a single holdout among the co-owners can block a sale or a refinancing the others want.

A TIC must stay under 35 co-owners and requires unanimous consent for major decisions, which preserves its 1031 status but lets any one co-owner block a sale or refinance.

TIC versus DST: the real trade

Both let you exchange into a fractional slice of an institutional property, but they sit at opposite ends on control and liability.

A TIC gives you real ownership: you are on title, you vote on major decisions, and you can independently exchange your interest. But you are also on the mortgage, so you carry personal liability for your share of the debt and the property’s risks, and the unanimity requirement can create gridlock. A DST gives you none of the control, you cannot vote or exit until the sponsor sells, but in exchange you have no personal liability, no governance headaches, and a faster, simpler close. The rough rule: choose a TIC when you want control and independent exchange flexibility and will accept liability and governance friction; choose a DST when you want pure passivity and liability protection and will accept powerlessness.

A TIC gives control, independent exchange rights, and personal liability with possible gridlock; a DST gives passivity and liability protection but zero control, so the choice is control versus simplicity.

The bottom line

• A TIC lets multiple investors co-own one property, each holding direct title to a fraction.
• Because each interest is real estate, each co-owner can independently 1031 in and out.
• Revenue Procedure 2002-22 keeps it from being a partnership: max 35 owners, no entity behavior.
• Major decisions require unanimous consent, which protects 1031 status but risks gridlock.
• Versus a DST: a TIC has control and independent exchange but real liability and governance friction.

For the passive alternative, read Delaware statutory trusts. For why partnership interests cannot exchange, see partnership issues in a 1031. For the full picture, start at the 1031 exchanges and exit planning hub.

Last verified August 2026.