Quick Answer
Tenants in common (TIC) is a co-ownership arrangement where each investor holds an undivided fractional interest in real estate, with a separate deed and no partnership entity. Ownership shares do not need to be equal, and each owner can sell, transfer, or bequeath their interest independently, without other owners' consent. TIC carries no right of survivorship.
Beyond limited partnerships, the SIE also tests another direct participation program (DPP) structure: tenants in common. While less complex than limited partnerships, TIC arrangements have unique characteristics.
What Is Tenants in Common?
- A co-ownership arrangement where each investor holds an undivided fractional interest in a property
- Each owner holds a separate deed for their ownership share
- Not a separate legal entity (unlike a limited partnership)
- Ownership shares do not need to be equal
Exam Tip: Gotchas
Each TIC owner holds a separate deed and reports income and expenses on their own tax return. TIC is not a partnership and does not file a partnership return.
Key Characteristics
| Feature | Tenants in Common |
|---|---|
| Ownership | Undivided fractional interest |
| Deed | Each owner holds a separate deed |
| Legal entity | Not a separate entity |
| Transfer rights | Can sell, transfer, or bequeath independently |
| Tax treatment | Pass-through (each owner reports their share) |
| Consent to sell | Not required from other co-owners |
Exam Tip: Gotchas
Ownership shares in a TIC do NOT have to be equal, and no co-owner's consent is required to sell or transfer another co-owner's share.
Transfer and Independence
One of the defining features of TIC ownership:
- Each investor can sell, transfer, or bequeath their interest independently
- No need to get approval from other co-owners
- This independence distinguishes TIC from joint tenancy (where right of survivorship applies)
Exam Tip: Gotchas
TIC has no right of survivorship. At death, a co-owner's interest passes through their estate (probate), not automatically to the surviving co-owners. Don't confuse TIC with JTWROS.
Now let's pull together the key characteristics that apply across all DPP structures.
What Should You Check on Exam Day?
- Can you explain why a TIC owner reports income and expenses on their own tax return instead of filing a partnership return?
- Do you know why TIC ownership shares do not need to be equal among co-owners?
- Can you state whether a co-owner needs consent from others before selling or transferring their TIC interest?
- Do you know what happens to a TIC owner's interest when they die?
- Can you explain how TIC differs from joint tenancy with right of survivorship?