December 1, 2007
--Sacramento, California--The California Franchise Tax Board issued Notice 1107_02 in November 2007 indicating that they are seeing a trend in tax adjustments from Like-Kind Exchanges of TIC Interests pursuant to Section 1031 of the Internal Revenue Code. 

The FTB stated that a "Tenant-in-Common (TIC) interest is considered like-kind property for purposes of an IRC Section 1031 exchange.  A partnership interest, however, is not treated as such under IRC
Section 1031 (a)(2), to which California conforms. We are examining transactions involving
exchanges of TIC interests due to findings of noncompliance in this area."

"There is really nothing new here.  Partnership interests are specifically excluded from 1031 exchange treatment.  Unfortunately, there are many real estate transaction structures that really are structured as partnership interests whether intended or not, and the FTB appears to be cracking down on real estate transactions that have resulted in an exchange of a partnership interest as opposed to a real estate interest," stated William L. Exeter, president and chief executive officer of Exeter 1031 Exchange Services, LLC.

Mr. Exeter continued, "the real troubling comment for me was the FTB statement that Revenue Procedure 2002-22 provided the minimum requirements for structuring a tenant-in-common TIC investment structure and that there were other issues they would look to in determining whether the investment transaction was structured as a tenant-in-common TIC investment or whether it was structured as a partnership and therefore not eligible for tax-deferred exchange treatment under Section 1031 of the Internal Revenue Code. 

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Exeter 1031 Exchange Services, LLC is a leading national provider of Qualified Intermediary, Exchange Accommodation Titleholding, and Advisory services for individual, corporate and institutional 1031 exchange clients.

Exeter administers all types of 1031 exchange transactions, including forward, reverse and improvement (build-to-suit or construction) 1031 exchange structures, in all 50 states.  Exeter 1031 Exchange Services, LLC currently has national office locations in San Diego, Irvine, Ontario, Bakersfield, Fresno, and San Francisco, California and Tucson, Arizona, Springfield, New Jersey and Winston-Salem, North Carolina.

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