CPA/Tax Pro good at explaining esoteric taxes?

CPA/Tax Pro good at explaining esoteric taxes?

Rental Property Investor · Gilbert, AZ · Member since 2017 · 69 posts · 64 votes

I'm looking for a tax wonk (CPA or tax pro), of sorts, that can satisfactorily explain a possibly esoteric tax situation to me.

I am an LP on multiple syndications and one such syndication sold in 2021. The K-1 was odd enough to confuse both TurboTax and a CPA. That is, my first round with the taxes was with TurboTax and while it seemed confident about the choices it made, I wasn't satisfied with its explanations. My goal with taxes is that even if I'm not doing them by hand, I still want to understand every choice on each line ("why is that value on that line?"). Since I couldn't get that clarity with TurboTax, I found a CPA with "extensive passive investing experience" through Picnic Tax. His interpretation of how to apply the K-1 was wildly different than TurboTax's... to the tune of some $12,000 more in taxes!

Unfortunately, I didn't get satisfactory answers from him, either. We went back and forth trading IRS publications but in the end, he cut me off saying that it was taking up too much of his time and he considered his services rendered appropriate for the price I paid. Maybe. I did think that if he understood that part of the IRS code better then it wouldn't have taken so long and he would have been able to convince me.

I paid the extra $12,000 (plus interest; got the penalties waived since it was my first time) just to be on the safe side. I'm still not convinced that it was correct, though.

I am willing to pay a CPA or tax professional with extensive experience with syndications in particular (not K-1s in general) to review already-submitted taxes (at least the specific part in contention) and prove to me what the right strategy is, backed up with the unambiguous lines from the supporting IRS docs.

If that goes well, then I will want my 2022 taxes finalized, too, but that's secondary to first knowing that there is one correct way to do the 2021 taxes and convincing me of that!

Any recommendations for such a person or firm?

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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
3y
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  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    3y

    Call the GP on the investment if this is an investment specific question.  They will have the answer.


    If this is a personal limits or offsetting question pose the general question here in two sentences. That will help direct the type of professional you’re looking for.  

  • Rental Property Investor · Gilbert, AZ · Member since 2017 · 69 posts · 64 votes
    3y

    The GP would be of little help, since this is a question of how the IRS would interpret the results and few GPs are tax professionals.

    In short, when a property sells, there are multiple lines on the K-1 that can contain the sale amount and the line chosen has a very large impact on where the value goes on the various IRS forms. In this case, the chosen line was apparently unusual enough that TurboTax and a CPA disagreed where the value goes and what it means, but neither could fully justify why. The difference meant that either the sale proceeds were passive gains and could be offset by my accumulated passive losses or they where regular capital gains and couldn't be (and result in $12,000 more in taxes). TurboTax insisted it was the former; CPA the latter.

  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    3y
  • Accountant · Dallas, TX · Member since 2016 · 161 posts · 75 votes
    3y

    @Kurt Granroth meet Curt. me. 

    I'll bite. Send me a DM I'll chat with you or scan over your 1040 and let you know what I think. I have extensive knowledge with syndications, LP vs GP investors, passive vs active income, etc. I'd be happy to give you a 2nd opinion. 

  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    3y

    Not counting on the GO being tax professionals. But other people if not themselves will have the same question.  They would be the first people to call.  

  • Accountant · Edina, MN · Member since 2020 · 172 posts · 97 votes
    3y

    A lot of CPAs / tax planning professionals will offer a free look at your tax returns to identify any mistakes / missed opportunities.  I would suggest meeting with someone who will offer a free consult, this is our approach.

  • Rental Property Investor · Gilbert, AZ · Member since 2017 · 69 posts · 64 votes
    3y
    Quote from @Michael Plaks:
    Thanks, Michael. Your posts are among the best at describing the subtleties of syndication tax benefits (compared to the hyperbole typically touted). My case here is super specific, though, so the truest sentence of the above in play here is: "[t]axes, especially in real estate, are so ridiculously complicated that your mileage will almost always vary". Indeed.
  • Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @Michael Plaks:

    Another esoteric question: If a property is bought "Subject To" (people have various definitions) but actually just giving cash for the equity to the seller & taking over the loan & payments and transfering title through escrow, 

    (but not signing for the loan, which would make it an assumption for you lurkers), 

    does that make it an installment sale for IRS reporting or simply a regular sale?  I think of Land Contracts, Contract for Deed and Wraps as installement sales. 

    I understand the implications of the Due on Sale clause for Subject To, this is actually just the tax perspective I'm asking about.

  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    3y
    Quote from @Account Closed:

    Another esoteric question: If a property is bought "Subject To" (people have various definitions) but actually just giving cash for the equity to the seller & taking over the loan & payments and transfering title through escrow, 

    (but not signing for the loan, which would make it an assumption for you lurkers), 

    does that make it an installment sale for IRS reporting or simply a regular sale?  I think of Land Contracts, Contract for Deed and Wraps as installement sales. 

    For the Sub2 seller, there is no installment sale. As far as he is concerned (from tax perspective), his loan has been paid off, and he received a lump-sum cash on top of it. He is fully paid. He would only have an installment sale if you paid him over multiple years. Him, not his (former) lender.

    Sub2 and assumption are identical for tax purposes.

    Now, CFD might be trickier, because there's a debate of whether the sale actually transpired. But this is getting esoteric. ;)
  • Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @Michael Plaks:
    Quote from @Account Closed:

    Another esoteric question: If a property is bought "Subject To" (people have various definitions) but actually just giving cash for the equity to the seller & taking over the loan & payments and transfering title through escrow, 

    (but not signing for the loan, which would make it an assumption for you lurkers), 

    does that make it an installment sale for IRS reporting or simply a regular sale?  I think of Land Contracts, Contract for Deed and Wraps as installement sales. 

    For the Sub2 seller, there is no installment sale. As far as he is concerned (from tax perspective), his loan has been paid off, and he received a lump-sum cash on top of it. He is fully paid. He would only have an installment sale if you paid him over multiple years. Him, not his (former) lender.

    Sub2 and assumption are identical for tax purposes.

    Now, CFD might be trickier, because there's a debate of whether the sale actually transpired. But this is getting esoteric. ;)
    Thanks. That is what I thought. I was listening to a Guru, who Bigger Pockets just published and promotes his book, who tells a nationally known speaker/investor on youtube by the initials GC that Subject To is an installment sale. Clearly it isn't.

     I just wanted to be sure I was giving a proper opinion to those who ask me about Subject To. Seems to me some  students may be headed to a very difficult tax audit following his advice.

    You may see a spike in business. ;-)

    You da man!
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