Question for syndicators

[Charlotte Dunford]

1. From a tax perspective, is it more beneficial for LP's to pay them more often so that they can invest the received profits into other investments? What is a good frequency to pay your LP's?

2. What type of tax deductions can the LP’s take on their return on investment?

3. What type of tax deduction can a GP take on their income?

[Omar Khan]

Originally posted by @Charlotte Dunford:

1. From a tax perspective, is it more beneficial for LP's to pay them more often so that they can invest the received profits into other investments? What is a good frequency to pay your LP's?

2. What type of tax deductions can the LP’s take on their return on investment?

3. What type of tax deduction can a GP take on their income?

1) While it is better to have a more frequent distribution than a less frequent distribution, most people typically do quarterly because it is a nice middle ground between convenience and administrative hassle. 

2) Cost segs are the big ones. I would also advise to look at your K1 to make sure that the sponsor isn't playing any games. Typically, some sponsors (mostly mentorship groups here in TX), will be deducting ALL of the returns they pay against your equity i.e. as time goes on you will have less and less of a share in the deal. 

3) Typically, expenses associated with asset management (for which they may or may not get reimbursed), can share in the cost seg and also have more control over the timing and frequency of distributions to manage their tax position better (unlike LPs). 

Don't know why most of the posts above you have asked you to consult with a CPA. Unless you have a very complex tax situation, 80%-90% of the deductions are the same, across the board for LPs and GPs. 

Just remember as an LP you have less control, as a GP you have more control.