All Forum Posts by: Wayne C.

@Keith Groshans, consider a real estate debt fund and reinvest the monthly dividends. Account keeps growing and no need to move distributions anywhere else to get a return. I am in one that has exceeded 10% annual return for the past three years.  

@Kaaren Hall, thank you.

@Kaaren Hall, would the syndicator's FMV be acceptable? My understanding is that the custodian will report the FMV that I give them, even if it's an estimate. Of course, it has to be honest and stand up to scrutiny I guess. Is this type of conversion likely to trigger an audit/inquiry from IRS?

If I have a traditional SDIRA with an apartment syndication holding that is making monthly distributions, can I do a Roth conversion of that holding? I am 71, but not taking the distributions..they are going back to the SDIRA custodian(non-interest earning account) and I periodically transfer them from the SDIRA custodian to a small balance Schwab IRA that is in a MM fund. My wish is to completely convert my traditional to Roth in 2024, but haven't found the answer yet that a Roth conversion is allowed for this type of holding. I've been in the deal less than a year, $75k investment, so assume I could use $75k as FMV, but can I do the conversion, and could distributions go to the Roth?

@Rob Block

I have been invested with Kirkland Income Fund for a year now, and am very satisfied. 

November Performance Update is 11.34%,  T-12 net return, compounded monthly

Quote from @Michael Plaks:

Quote from @Wayne C.:

@John P.

To expand the discussion, for those among us who are evaluating funds to invest in, but want to avoid the tax preparation cost of multiple state tax returns, the following article talks about the benefit of a private equity fund structured as a REIT. Per the author, the REIT structure eliminates the need for multiple state tax filings at the investor level, as well as eliminating UBTI.

Yes, you will be receiving dividends instead of K-1, so no state reporting hassle. However, this is the tail wagging the dog. When evaluating investments, I always preach these priorities:

1. Does this investment fit my overall business plan?
2. How profitable is this investment?
3. What are the risks of this investment?
4. Tax considerations

I will always disagree with investors prioritizing #4 above the other, more important, criteria.

Also, I'm confused with you mentioning UBTI. If you're concerned about UBTI, then you must be considering investing via your self-directed retirement accounts. But SDIRAs are not subject to the state reporting requirements that we're discussing here. If you're investing via SDIRA, you should not worry about states, and this particular advantage of REITs (no state reporting) is irrelevant.

Thank you, Michael. I'm not able to strictly prioritize your criteria in that order for every investment. Surely, any investment must fit one's plan, and risks can be logically evaluated, but a certain profit cannot be accurately calculated..it's always a gamble in real estate. It just seems to me that the cost of tax compliance can be a high priority, especially for a likely 10 year hold QOF. Engaging a tax pro year after year for multi-state returns has the same impact on profit as the fees that are charged by the fund sponsor. 

Regarding UBTI, you are correct that it is only a concern within a SDIRA investment. I only mentioned it because it was mentioned in the article I linked to, and has been a topic of discussion in this forum.  

@John P.

To expand the discussion, for those among us who are evaluating funds to invest in, but want to avoid the tax preparation cost of multiple state tax returns, the following article talks about the benefit of a private equity fund structured as a REIT. Per the author, the REIT structure eliminates the need for multiple state tax filings at the investor level, as well as eliminating UBTI.

As someone who has learned the hard way about multi-state tax filings and composite returns, I  want to avoid those in the future, and since I'm currently looking at QOF's I welcome comments about fund choice based on how it is structured.  

https://www.eisneramper.com/reit-private-equity-fund-0818/

I have recently invested some SDIRA funds in a commercial real estate income fund that provides short term real estate bridge loans. Past performance of the fund is attractive, and since I want maximum growth and not monthly income, the fund facilitates automatic reinvestment of monthly interest for compounding of my investment. The fund uses no leverage, so for a SDIRA, it does not trigger UBIT. If it continues to perform well, this checks all the boxes for me as a one-and-done investment...no distributions for me to manage and reinvest somewhere. If anyone knows of or has  experience with a SDIRA investment that has similar features, I would welcome recommendations so I can research alternate investments if needed.

Thank you, @Michael Plaks

Quote from @Michael Plaks:

Quote from @Brandi T.:

I'm figuring a year end tax payment - we sold a rental property for a gain (held more than one year) and will have K-1 losses from two syndications that we are LP.  Turbotax is allowing the losses from the K-1 to offset the gain from selling the rental...based on Section 469(g)(1)(A) 
Can someone confirm that seems right?  I had expected to pay tax on the gain and the suspended losses would continue to grow until the syndications were sold.

Passive losses are suspended until either of the two events happens: you sell/dispose of the investment OR you have passive income to apply these losses against. It does not have to be passive income from the same activity, any activity qualifies. Since gains on the sale of a rental property are normally considered income from a passive activity, you do get to offset one against the other, as TT suggested.

That said, sale of a rental can create other complications, and you may or may not get the correct result out of TT. Consider professional help.

 To expand this topic with a slightly different question...If long term gains from selling a rental exceed K-1 passive losses for a given tax year, can K-1 losses in a future year offset those gains from the prior year?