Limited Partner (LP) write offs in syndications?

[Edward Stephens]

Hi BP!

  I am a real estate broker and also owner of my own rental properties.  I recently invested in a multifamily syndication and received a K1.  My CPA has instructed me that the depreciation I take from that particular investment can be used against the passive income I make from that particular investment only.  I am not able to use the additional depreciation I receive from my investment to apply against my active income.  When asked why, he stated that because I am a passive investor (limited partner), I can only apply passive losses to my passive income.  The remainder of the depreciation cannot be taken until the property in the syndication is sold.  At that time, the remaining depreciation will be freed up and can be applied against my passive income that I make from the sale (but still not against any active income I make as a real estate agent).

  I’d like to get the community’s thoughts on this, especially in light of all the syndications that are happening.  Please keep in mind that I am a real estate professional, and so the answer you give might be different for me than for a limited partner who is not a real estate professional.

Thanks in advance everyone!