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Tax Issues of Real Estate Syndications: Limited and General Partner Considerations, Carried Interest, and 163(j) Interest Limitations

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

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Conducted on Wednesday, April 19, 2023

Recorded event now available

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This webinar will review the tax considerations of real estate syndicates for investors and tax professionals working with these unique real estate partnerships. Our panel of real estate strategists will discuss the tax implications for general partners, limited partners, and the flow-through entity.

Description

A flow-through entity that allocates over 35 percent of its losses in a tax year to limited investors is considered a syndicate. Being a syndicate precludes the classification of the entity as a "small business" under IRS guidelines. Due to this classification, syndications are subject to Section 163(j) interest limitations.

Real estate syndication allows individual investors to buy a fractional share of a significant real estate investment. A limited partner does not need to find the property, arrange financing, or participate in the day-to-day management of the property. At the same time a limited partner can reap the rewards of owning a piece of a large potentially lucrative investment. Aside from the benefits offered to partners, some caveats must be weighed and general partners have their own tax considerations as well. General partners typically receive fee(s) related to the purchase, development, refinance, and/or disposition of the property that are subject to self-employment tax.

Listen as our panel of real estate experts explains the tax advantages and disadvantages of real estate syndication for flow-through entities and their investors. Understanding the benefits and caveats of this classification is critical for tax practitioners working with real estate partnerships.

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Outline

  1. What is a real estate syndicate?
  2. Tax issues for general partners
    1. Fees and self-employment tax
    2. Carried interest
  3. Tax issues for limited partners
  4. Section 163(j) interest limitataion
  5. Other considerations

Benefits

The panel will cover these and other critical issues:

  • How limited partners are taxed in real estate syndicates
  • Taxation of carried interest earned by the general partner
  • Calculating the 163(j) business interest expense limitation
  • Self-employment tax and other considerations for general partners of a real estate syndicate

Faculty

Castelli, Thomas
Thomas Castelli, CFP, CPA
Partner
Hall CPA

Mr. Castelli's areas of focus are tax planning

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Deaver, Kaylyn
Kaylyn Clark Deaver, CPA
Tax Manager
Hall CPA

Ms. Deaver's areas of focus are tax planning and CFO.

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