The short answer
Rev. Proc. 2002-22 is the IRS revenue procedure that lists the conditions under which the IRS will consider a ruling that an undivided tenancy-in-common interest in rental real property is not an interest in a business entity. The distinction matters because interests in a partnership are not real property for section 1031. The conditions, including a cap of 35 co-owners and unanimous approval of sales, leases and blanket-lien debt, are ruling guidelines rather than substantive rules.
At a glance
| Co-owner cap | 35 persons, with a married couple counted as one |
|---|---|
| Unanimous votes | Sale, leases, blanket-lien financing, hiring a manager |
| Majority votes | Other actions, by holders of more than 50 percent |
| Status | Guidelines for ruling requests, not audit rules |
The procedure asks whether co-ownership has become a partnership.
Rev. Proc. 2002-22 explains that mere co-ownership of property that is maintained, repaired and rented is not a separate entity, but a joint venture can be. It cites Bergford v. Commissioner, where 78 investors in leased equipment were held to be partners because of limits on their rights and the manager's share in profits and losses.
Section 3 says the guidelines only assist ruling requests and are not to be used for audit purposes. Even so, its 15 conditions set out in detail what the IRS wants to see before it will rule, and the TIC interest property page covers selling one today.
The procedure also superseded Rev. Proc. 2000-46, under which the IRS had refused to rule on whether undivided fractional interests in real property were interests in an entity ineligible for exchange.
The key conditions limit numbers, votes and side payments.
Section 6 sets the conditions the IRS ordinarily requires. The most cited are these:
- Each co-owner holds title as a tenant in common, directly or through a disregarded entity; no entity may hold title to the whole property.
- No more than 35 co-owners, counting a married couple as one person and heirs of one co-owner as one person.
- Unanimous approval for any sale, lease or re-lease, any negotiation of blanket-lien debt, the hiring of a manager and any management contract.
- Management agreements renewable at least annually, with net revenues paid out within 3 months.
- Advances to a co-owner only if recourse and for no more than 31 days, and no put options to the sponsor, lessee, lender or other co-owners.
The unanimity rule is where TIC structures bite, and why DSTs work differently.
Hypothetical: 30 co-owners hold a shopping center and the loan comes due. Refinancing a blanket lien needs every co-owner's vote, so one holdout can block it. Run any real scenario past your attorney and CPA.
Section 6.06 adds that each co-owner must keep the right to transfer, partition and encumber its interest without anyone's approval, subject only to customary lender restrictions, rights of first offer and a fair-value buyout offer before partition.
Rev. Rul. 2004-86 took a different route. It held that interests in a Delaware statutory trust whose trustee has no power to vary the investment are treated as undivided interests in the real estate, so they can be acquired in a section 1031 exchange. Investors do not vote on leases or financing because those terms are fixed. See DST versus TIC structure and the limits a DST trustee must live within.
Related questions
Must a TIC meet every Rev. Proc. 2002-22 condition to qualify?
The revenue procedure says its guidelines are not substantive rules. Whether a co-ownership is a partnership is decided under the entity classification regulations and case law; the conditions show what the IRS wants to see before ruling.
Can a TIC sponsor manage the property?
Yes. Section 6.12 allows the sponsor or a co-owner to be manager, but not a lessee, and fees cannot depend on income or profits from the property.
Can multiple parcels be one property?
Section 4 lets parcels leased to one tenant under one lease and secured by one debt be treated as a single property, if each co-owner's percentage is identical in every parcel.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.