Tax Deferment as an LP investor on Multi-Family Syndication

[Scott Blackwill]

I understand you can defer taxes on SFH through a 1031 exchange, but what about tax deferment as an LP of a syndication? It's my understanding you'll have some paper losses due to depreciation that you can push to forward years when it's needed. As a class B investor, when the property sells, and there's a gain on the sale of the property and the investment is essentially closed, can you defer the capital gains on that equity split to a new syndication investment? Or is the tax benefit simply the depreciation benefit that's realized as needed over the life of the investment?

[Bill Exeter]

Hi @Scott Blackwill, 

The 1031 Exchange gets more complicated when their is a syndication (limited partnership). The LP actually owns the real estate.  You do not own the real estate.  You own a partnership interest in the entity.  

The entity can certainly sell the real property and then structure a 1031 Exchange and reinvest as the LP, but the individual partners are merely receiving cash distributions from the LP.  There are ways to address this issue, but careful planning is required.  

The important point here is that you can not just take your proceeds and structure a 1031 Exchange.