State Taxation on Private Real Estate Funds

[Jim Dahle]

I'm not particularly interested in owning real estate directly, so I look at both syndications, private real estate funds, a simple REIT index fund.

I generally only invest in syndications in tax-free states or in states I'm already filing a tax return in to avoid that additional hassle.

What I'm still not 100% clear on, however, is how state taxes are treated for private real estate funds, how that changes based on whether or not a composite state income tax return is filed by the fund, whether that changes based on whether the fund converts to a REIT structure, and how that changes based on whether the fund invests in debt or equity.

I cannot find any good resources on this anywhere. Can anyone enlighten me to these issues? When are taxes due and when must state tax returns be filed? Obviously, that's going to vary a bit by state, but a general framework would be helpful. 

[Eamonn McElroy]

@Jim Dahle

The source of the income AND the facts and circumstances.

Interest income can be portfolio income...  Interest income can also be business income subject to SE taxes...