Accredited Status - Net Worth Requirement

[Jeffrey J.]

Random question that I couldn't find when searching BP. When calculating your net worth for accredited status, how are investments in syndications treated? Are they completely excluded from the calculation or are we able to include? Would love feedback from anyone who has gone through the process! Thanks all. 

[Brian Burke]

@Jeffrey J., I can think of three potential solutions here.

The easiest is to simply provide copies of the subscription agreements. These show the amount that was invested and the name of the LLC or LP. Most syndication sponsors don't mark to market so the value at any point in time would be the amount originally contributed, despite the fact that the real estate is likely worth more or less than the partnership acquired it for.

The next step up, if that isn’t good enough, would be to provide a copy of the subscription agreement along with some evidence that the funds were transferred, such as a wire confirmation or canceled check.

Third one I'm not sure about but taking a stab at it. Every year we get valuation forms from the IRA custodians of our investors that subscribed via self-directed IRAs, asking us as the sponsor to value the investor's position in the entity. We fill these out and sign, certifying that the value is $X as of whatever date. Perhaps the verification service would have a similar form that the sponsors of your syndication positions could complete and sign? That one would be a pain for everyone so hopefully just providing subscription agreements is good enough.

Regardless of the method used to prove your investments in these entities, they are absolutely included in your net worth.