Syndicator's acquisition fee tax deductions

[Charlotte Dunford]

Can you deduct operating expenses from acquisition fee received? Let's say you received $30,000 in acquisition fees, the first year operating expenses of the property is $45,000. Can you deduct all of that? Or do you only get to deduct whatever costs you before closing?

[Bruce Petersen]

The accountants on the boards can better answer this but, the acquisition fee is ordinary income and is taxed right away. This is income to you and the expenses you are referencing are for the property (LLC) and not your personal expenses so you won't be able to deduct them from your income.

Start up costs are an LLC expense as well and have no effect on your ordinary income. This is part of the reason I don't personally do acquisition fees myself.

You should consult with your own CPA as everyone's situation and structure is different though.