It took a tax law to bring real estate and securities brokers together, though securities law is what’s keeping them–at least some of them–at arm’s length.

The unlikely “pairing” of securities and real estate professionals is common in 1031 TIC tax-deferred exchanges, in which property owners sell property, such as a rental home or apartment building, in exchange for a share in the passive ownership of a larger property, such as a shopping mall or office park.

The real estate community is expressing a growing interest in these transactions, which inherently require the sale and repurchase of property. While real estate agents play an integral role in the transactions, federal law prevents commission-sharing and other types of fee arrangements between securities brokers and real estate brokers.

Most professionals working in the TIC-exchange industry would agree that under federal securities law, most–if not all–TIC exchanges are considered to be securities, not real estate transactions. That means only licensed securities brokers should be authorized to arrange these transactions, the experts say.

The “1031” in these transactions refers to Internal Revenue Code 1031, which offers a tax shelter for these types of transactions, and “TIC” refers to the common owners of a property. Property owners often choose to participate in these transactions for tax reasons, as they offer a capital gains exemption, and also because they provide a more passive role in property ownership. TIC exchanges also offer a source of income, and proponents say the rate of return can range from 12 percent to 15 percent in some cases.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription