High level of taxes for syndication

[Rud Sev]

Hello,

I am new to the world of syndication (LP investor) and want to understand how taxes at a high level for syndication as LP before asking individual specific questions to my CPA.

Notably, I want to understand how preferred returns/cash flows are taxed, if at all, until the amount invested has been returned. I could not find the answer I'm looking for when searching.

The following example could be used:

- Amount invested $100k

- Preferred return (5 years): 8% or $8k

- Disposition (Sale) (Year 5): $200k

This simple example assumes no cash flow beyond the preferred return, no cost segregation/bonus segregation, and doesn't take depreciation into account.

Would the first 5 years of cash flow (preferred return) not be taxed, and only the remaining amount on the disposition would be taxed (e.g. $200k - $100k + 5 * $8k = $140k)?  Would the federal tax liability be $140k at year 5 for the sale, with long term capital gains (ignoring any Net Investment Income Tax)?

If there is a good post or article regarding this topic, I'd be happy to read it. Thank you!