All Forum Posts by: Evan Loader

@Ari Newman

Definitely a relief for the time being.

With the current draft legislation under consideration in the House Ways and Means committee, specifically section 138312 that will end the ability of IRAs to invest in private offerings targeting accredited investors (yes, that means syndications through Regulation D so either 506b or 506c which affects accredited and non-accredited sophisticated investors), how do LP investors & sponsors out there plan to handle this provision if it passes both chambers and is signed into law?

Sponsors –

By potentially losing this giant pool of IRA capital, how much of an impact will this have on your ability to raise capital for future deals?

How will you handle the provision that requires those with IRA funds already invested in current deals to divest them within 2 years?

Is the potential passing of this legislation already changing your approach to accepting IRA funds in deals?

LP investors –

Even if you are not using IRA funds to invest in deals, this still will affect deals you are invested in since at least some of your co-investors in deals are using IRA funds.

Personally, that's now going to be one of my first discussion questions when vetting deals and sponsors. I am concerned that current deals in execution could face a forced early exit or recapitalization event to replace IRA investors. To mitigate that risk in future syndication investments, I want to know how this will be handled.

For reference if you want to see the draft legislation - 

https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SubtitleISxS.pdf

Has anyone looked at the draft legislation under consideration by the House in the Federal budget reconciliation bill? Specifically section 138312? If passed, it would restrict the ability of using IRA funds to invest in Regulation D offerings that are targeted at accredited investors.

This would effectively end the ability for accredited or sophisticated investors of using IRA funds to invest in private syndications. So 506b or 506c deals will see a giant pool of capital locked out from investing in these deals.

Even worse, it would require those currently invested in syndications with IRA funds to unwind them in 2 years. How would that even work?

Thoughts?

https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SubtitleISxS.pdf

@Lane Kawaoka

Thanks for the info, I do have the forms 8582 for each year I’ve invested. My current CPA has done an adequate job on that front. I was concerned that my suspended losses I carry forward wouldn’t be able to offset depreciation recapture gains upon exit. Sounds like I can.

@Lance Lvovsky can I infer/conclude then in my scenario examples that depreciation recapture will not result in additional tax owed for the depreciation recapture portion of the gain if I have suspended passive losses to offset it?

I have yet to experience depreciation recapture, since none of the syndications I participate in have exited.

My question is this. I have had paper passive losses on all K-1s filed with no passive gains to offset(I’m a W-2 civilian defense contractor so I can’t offset active W-2 income in my situation since I am not a REP) and I have preserved those losses both on my federal return and the state returns I invest in.

I intend to carry those passive losses forward until I exit on a deal and use those losses to offset part of the gain. I know my basis falls due to the depreciation and those carry forward losses should offset that. Assuming I carry losses forward on a deal until exit will I be able to offset the depreciation recapture portion with those suspended losses I carried forward? My concern is if I didn’t get to experience the benefits of the depreciation I should be able to offset it when I sell. I claimed them on my return but since there was no passive gain to offset they carried forward. The key is to carry them forward via suspended loss on your return in order to use them at exit correct?

I appreciate the insight anyone would have on this.

Update, I found a CPA in TX who could handle my 2020 situation; including all of my K-1 forms to preserve the loss carry forwards in each state as well as my expat taxes, but it was not cheap. $1475 after it was all said and done, which is nearly triple what I’ve ever paid in the past.

Still, glad it was done and done properly. Hoping 2021 taxes are not as much of a headache. Some constructive lessons learned.

@Brian Burke I went back and looked at each(6) of my 2020 K-1 and each has a state form.  Thanks for setting me straight, shame on me for not looking beyond the first 2 or 3 pages of the document. @Michael Plaks I have the documents, so will follow up with you. 

@Evan Polaski @Brian Burke @AJ Shepard do you know what Michael is referring to with state specific K-1s? I have only ever received 1 K-1 for each syndication deal from all my deals.

@Michael Plaks I am invested in 6 syndications as of year end 2020 with 6 different sponsors and none of them sent me state specific K-1s as a passive LP. I know some do a composite state return, but none of mine did or do.