All Forum Posts by: Young Moon

Thanks all - very helpful feedback!

Thanks Steve and Leslie - very helpful feedback!

Thanks Natalie - will definitely look into that!  

Hi all - I am in the process of negotiating a 28 unit apartment and the seller is telling me that he may not be able to do the deal because of the tax hit that he would take upon sale.  He has been depreciating the property for the past 10 years and he is concerned that he will not be able to cover taxes owed upon.  He is aware of a 1031 exchange, but can't find a property he would be willing to trade up to.  I also floated seller financing as an option to defer his taxes, but not sure he is interested in that.  Does anyone have any creative tips on solving this issue, so I can land this deal?

Thanks everyone!

I am in the process of negotiating a deal for a 28 unit apartment complex.  Seller has just talked to his accountant and said his tax hit would be too large if he sold to me because he has taken 10 years of depreciation on the property.  He is aware of a 1031, but there is no property that is available that he wants to trade up to.  I also floated the idea of seller financing to help defer some of the tax burden.  Has anyone encountered this issue before and does anyone else have creative ways to solve the tax issue, so I can land this deal?

Thanks all!

Very helpful - thanks!!

Thanks Linda - just so I am clear, if, for example, the apartment has cash flow of $10,000 for the year, but the depreciation expense is $12,000 for the year, and I distributed the entire profits to the members of the LLC, then when the member files his taxes, they would not be taxed on any of that $10,000 income because it is completely sheltered by the depreciation?

I am looking to purchase a 28 unit property and have a money partner. I am looking to either set up a partnership or a LLC. The idea would be that I would act as GP/manager of the entity and have him be an LP/non-managing member (although I would also invest some of my money as an LP/non-managing member too). He would get a preferred return (probably 8%) and then there would be a sponsor promote as well on distributions above the preferred return (probably a 65/35 split).

On properties that I currently own, I pay no taxes on my profits because depreciation is deemed an expense and offsets my profits.  My question is whether this same sort of tax treatment would be available to both me as the GP/manager and my partner as the LP/-non-managing member if I make a distribution out of profits.  Is there a way to structure it so that this is the case.  My accountant is saying no, but I thought I would check with the good folks here.

Thanks!

Thanks Wally!

Thanks Matthias!