Internal Revenue Code 1031 regulates the tax-deferred exchange of like-property. Under this section of the IRS Code, investors selling investment property may place the proceeds into another investment property using the services of a qualified intermediary in order to defer capital gains tax.

The investment property purchased must be like-kind, as defined by the IRS. These properties can vary greatly in terms of size, type and price. Some investors may choose to exchange for a property requiring day-to-day management on the part of the purchaser. Many, however, utilize a strategy for their 1031 exchange allowing them to shed the day-to-day responsibilities by investing in a tenant-in-common investment. A tenant-in-common investment is most frequently a property that is institutional quality and, therefore, unattainable by the individual investor. When the property is co-owned by a group of accredited investors as tenants in common, these high-quality properties can become a key component of an investor's portfolio. A tenant-in-common property is typically structured to meet IRS–provided guidelines in Rev Proc. 2002-22, limiting investors to 35.

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