How to use real estate to offset some of the tax hit on a private equity payout

[Rick Richard]

Hi, my wife is expecting a K1 equity payout this year.  Can we use our current investment propeties or purchase another investment property purchase to at least slightly offset the tax hit?  

[Rick Richard]

Quote from @Mason Liu:

You are going to need to consult a tax professional on this. The K1 could show you have ordinary income, deductions, capital gains etc depending on what the investment opportunity was and how they managed and exited the investment vehicle. Depending on what type of income/payout you received from the deal (as shown by the K1), there may be chances to offset some of those tax concerns from the K1 with real estate or other vehicles. 

You should be receiving some type of quarterly statement from the GPs of the deal showing how they are doing and what the NAV of your LP ownership is, including income you've received. You can share that with your accountant and start to have a conversation now of what your tax liability (if any) from this deal may look like and start to develop plans on how to potentially mitigate those if they are substantial.

 Thanks, we've asked and paid 3 CPAs, 1 was a "tax strategist", no strategies or real understanding from any.