All Forum Posts by: Scott Blackwill

Question for you Evan about this strategy. If you have multiple syndications, Property A is a 7 year hold with depreciation and Property B is a 3 year hold, both of which would give you passive losses, can the passive loss carryover from Property A (7 year hold) be used to offset the capital gains when the Property B (3 year hold) is sold? 

In that example let's say Property B is sold in 2023 and Property A is held until 2027. 

I know that when syndication interest is sold the passive losses are essentially forfeited, but I am not sure if the passive losses still being carried over from the 7 year hold can offset the capital gains (or if those are treated separately by the IRS). 

I guess the question is--can passive losses from depreciation on one syndication offset capital gains from another syndication? Or does it only apply to passive distributions? I'm assuming this would not be the case as even passive losses are caught up with depreciation recapture upon sale. 

@Scott Blackwill, You've seen the "elephant in the room" with syndications. The accelerated depreciation that seems so enticing can come back to haunt you upon sale of the asset if the 1031 option is not available. Most "syndications" will set up in the GP//LP/LLC entities and if you are simply a member of the entity you cannot do a 1031 on your membership share.

Those that can have found syndications that allow the investor to take title to a tenant in common % of the real estate itself.  It is that actual purchase of real estate that allows you to 1031 into a syndication and sell and 1031 out of the syndication.  These are pretty rare and usually your capital contribution needs to be large enough to justify them going through the hoops to set it up for you.

My clients having the most success with syndications are operating on a model where they keep their buy and hold asset investing and their passive syndication investing separate.  They use the 1031 to sell and buy investment real estate.  And occasionally they will refinance one of these properties and take the cash to invest in the syndication.  This preserves the tax deferment of their real estate holdings but still lets them invest in the syndication factoring in the taxes from the syndication structure as part of the return equation from that syndication.

Hi @Scott Blackwill, 

The 1031 Exchange gets more complicated when their is a syndication (limited partnership). The LP actually owns the real estate.  You do not own the real estate.  You own a partnership interest in the entity.  

The entity can certainly sell the real property and then structure a 1031 Exchange and reinvest as the LP, but the individual partners are merely receiving cash distributions from the LP.  There are ways to address this issue, but careful planning is required.  

The important point here is that you can not just take your proceeds and structure a 1031 Exchange.  

@Scott Blackwill

Are there any plans for the LP to sell the property and for the LP to do a 1031 exchange?

"$20,000/mo on an assumed 7%COC"

Math not that hard, $240K year at 7% = $3.428M

I can do that Math.  If you read my post the question was more loaded than that. Wanted an idea on annual capital that included equity splits and reinvesting cash flows.  Thanks for your input.