Tax Issues in Real Estate Partnerships: Dealer vs. Investor Status, 163(j) Interest Limitations, Section 266 Election, 199A

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, August 25, 2021

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Course Materials

This course will provide tax advisers with a detailed and practical guide to navigating the planning and reporting complexities and opportunities for real estate partnerships. Our panel of real estate experts will analyze the factors that determine dealer status along with recent cases to enable real estate owners and their advisers to report investor or dealer status and properly mitigate IRS challenges.

Description

From the formation of the entity, ownership and holding purpose affect how the income, deductions, gain, and loss are characterized, allocated, and reported among various partners. Real estate partnerships carry a myriad of tax considerations, which tax professionals must identify to serve their LLP and LLC clients.

Among the many critical planning and reporting challenges is distinguishing between a real estate investor and a dealer. The question of whether a partnership is treated as an investor or as a dealer has significant tax implications because income recognized on the disposition of investment property can qualify for favorable long-term capital gains rates. Still, gain from the sale of inventory is ordinary income. Based on a facts-and-circumstances test, the investor vs. dealer distinction is frequently challenged by the IRS.

The same taxpayer could be treated as holding certain property for investment and other property for sale to customers. Qualifying for 199A, depreciation, capital gain, and ordinary loss treatment are determined based on these classifications. Understanding the factors establishing dealer vs. investment status is key for practitioners advising taxpayers owning real estate.

Listen as our experienced panel provides a detailed and advanced look at the complexities of real estate partnership tax reporting and discusses some of the planning techniques available to avoid negative tax consequences when filing Form 1065.

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Outline

  1. Tax criteria and consequences of dealer status
  2. Tax criteria consequences of investor status
  3. Opportunity zones
  4. Carried interest regulations
  5. 163(j) - interest deduction limitations
  6. Planning for the desired status
  7. Relevant cases

Benefits

The panel will review these and other important issues:

  • When to advise partnerships holding real estate assets to avoid dealer classification
  • Planning structures that help reduce the amount of gain taxed at ordinary income
  • Electing out of the 163(j) interest limitation
  • When to consider the Section 266 election to capitalize carrying costs

Faculty

Arndt, Kimberly
Kimberly Arndt
Director, National Tax Services
PricewaterhouseCoopers

Ms. Arndt has worked in the real estate industry, advising clients, including public and private REITs, on complex U.S....  |  Read More

Feuerstein, Adam
Adam S. Feuerstein
Principal, National Real Estate Tax Technical Leader
PricewaterhouseCoopers

Mr. Feuerstein has worked on many REIT monetization, conversion and M&A transactions, PropCo/OpCo structures and...  |  Read More

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