All Forum Posts by: Mukesh Yadav

 Thank you

@Mukesh Yadav

Not enough details for a useful answer. The pass-through K1 losses that were previously locked due to the passive activity loss (PAL) rules do get unlocked in the year the syndication is dissolved, and there is a K1 marked "final."

In addition, there is a separate issue if you lost your principal investment. This gets complicated and is not a DIY project.

And, depending on the specifics, various other limitations can come into play.

*Not tax advice*

If your involvement in the syndication investment is considered passive and you are not a real estate professional, you generally cannot offset W-2 income with passive losses. Passive losses are typically carried forward to future years and used to offset future passive income or gains from the same activity or a similar one.

However, there is an exception under the tax law for "passive activity loss limitations" when an investment is disposed of in a complete disposition. This means that if you dispose of your entire interest in the activity in a taxable transaction (e.g., you sell your investment), you may be able to use any remaining suspended passive losses to offset other forms of income, including non-passive income like W-2 income.

It's important to note that tax laws and regulations can be complex, and the treatment of passive losses can vary based on individual circumstances and changes in tax laws. To get accurate and up-to-date advice tailored to your situation, it's highly recommended that you consult with a qualified tax professional who can review the specific details of your syndication investment, your financial situation, and the applicable tax rules to provide accurate guidance.

The investment amount might be capital in nature and will have some limitations. 

Sorry, but interpreting legal instruments is EXACTLY the time to get a lawyer involved.  

If the sponsor drafted something they got off the internet, you want to get a lawyer to look at it.  If you don't fully understand what the investment is, you want to get a lawyer to look at it.  Before the transaction goes sideways to see what your options are going in, you want to get a lawyer to look at it.

Sure, the investor is going to pay a bit to have a lawyer look at it, but it is often better to pay a bit now and pass, than invest and pay a lot later.