Devoted to understanding the basics and fundamentals of investing

When Gardner buys into a TIC, foregoing the time-consuming responsibilities of active real estate management, he retains an undivided fractional interest in the underlying property, and as an owner and a named deedholder,
isn't Gardner subject to the same potential liabilities of any property owner, just like he was before investing in the TIC?

And when he swaps out of the TIC into a REIT in a tax-free exchange, doesn't Gardner assume an even greater potential liability as a general partner in an broader (although more diversified) real estate investment trust vehicle, while continuing to forego any active management authority (as well as the responsibility, of course)?

Assuming Gardner remains active and in excellent health, which we both hope is true but is by no means certain for an 86 year old, would you be hesitant to recommend someone of that age assume significant potential partnership liability exposure to his entire estate, which this rather complicated tax-avoidance/deferral process would appear to entail?

Gardner could probably play even MORE tennis if he cut back on the time he expends fly fishing too, but I wouldn't feel very comfortable recommending he do that either!

P.S. -- EVERYBODY's just going to LOVE the incredibly clever title you dreamed up for this post!

Both TICs and the Operating Partnerships of the UPREITs and DownREITs carry liability insurance. Owners of the TICs have voting rights for major decisions on the property.

I'm sure there are ownership rights with the UPREITs and DownREITs as well, but the REIT generally is the controlling partner so it doesn't much matter.

I don't think liability is the major issue. Liquidity and the inability to exchange back to rental properties are probably the major drawbacks.

I'm too clever by half with such an evocative title.

That's an excellent point which I totally failed to consider. I never even thought about the prospect of illiquidity or reconversion as potential drawbacks. REITS so often appear to offer such excellent liquidity in the marketplace, in comparison to commercial income investment properties which are frequently cherry-picked by real estate speculators and generally trade by appointment only.

Over-thinking the subject further, I suppose another major drawback could be the unanticipated incursion of a substantial "suprise" tax liability, if the IRS should ever reverse itself retroactively, sometime in the future, from its current view that these "exchanges in kind" are tax-free events (or swaps). Granted, this is not a probable expectation, but stranger things have occurred in the past, when relying upon current IRS opinions to anticipate future tax law changes, and it sure would be a bummer to people like Gardner and his heirs.

We're all still groovin' on that cool title. You've definitely outdone yourself again this time!

The illiquidity only exists as long as you wish to defer taxes. The second you exchange for the REIT shares, you become completely liquid. Of course you also incur taxes.

The problem with sovereign entities is that they are sovereign. They can change their minds and there is nothing you can do about it. However, since 2002 this conversion process has grown into a multi-billion dollar industry. It would probably require an act of congress to change the rules and in that case existing holders have to be grandfathered (it's the law.) But as they say, you pays your money you takes your chances.