Tax deduction on syndication investment forclosure

Multi-Family and Apartment Investing
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Tax deduction on syndication investment forclosure

Mayur Gaitonde
Member since 2024 · 4 posts · 2 votes

Hello I am new here and looking for advice.  Couple of the syndication deals I had invested in passively and have been foreclosed on by the lender. I have lost 100% of the investment amount. I was wondering if there are any potential tax deductions we could take as a passive investor.  Would they just be passive losses that can offset passive income or can we treat them to offset capital gains from other investments ?

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Robert Rixer
Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
2y

Sorry for the loss - I'm sure the wider community here will be wanting to know the identity of these syndicators. Best to talk the tax issue over with a CPA but the loss will be reflected in the K-1's and can offset gains in other deals, provided they both flow through to the same entity (or you personally).

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  • Robert Rixer
    Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
    2y

    Sorry for the loss - I'm sure the wider community here will be wanting to know the identity of these syndicators. Best to talk the tax issue over with a CPA but the loss will be reflected in the K-1's and can offset gains in other deals, provided they both flow through to the same entity (or you personally).

    1Reply
  • Gino BarbaroPro Member
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    2y

    @Mayur Gaitonde

    I would discuss this with a qualified CPA. I've interviewed Mark Kohler, Brandon Hall, And Tom Wheelwright. They will be able to answer your question

    Gino

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
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  • Mayur Gaitonde
    OP
    Member since 2024 · 4 posts · 2 votes
    2y

    Thank you for the replies. Most of the investments that resulted in foreclosure were with Alan Stalcup's GVA



    Multifamily Syndicator GVA Scaled Up at Worst Possible Time (therealdeal.com)

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Mayur Gaitonde

    Unfortunately in many of these situations you may actually owe taxes. The reason is the sponsoray have taken 100% depreciation or accelerated depreciation and they may have to be given back

    This is the double whammy of these types of deals.

    I would speak to your accountant

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  • Michael K GallagherBusiness Member
    Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
    2y
    Quote from @Mayur Gaitonde:

    Thank you for the replies. Most of the investments that resulted in foreclosure were with Alan Stalcup's GVA



    Multifamily Syndicator GVA Scaled Up at Worst Possible Time (therealdeal.com)

     Really interesting article, thank you for sharing.  that's quite the write-up he got!

    [email protected]614-362-2231
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  • Mayur Gaitonde
    OP
    Member since 2024 · 4 posts · 2 votes
    2y
    Quote from @Chris Seveney:

    @Mayur Gaitonde

    Unfortunately in many of these situations you may actually owe taxes. The reason is the sponsoray have taken 100% depreciation or accelerated depreciation and they may have to be given back

    This is the double whammy of these types of deals.

    I would speak to your accountant

    @Chris Seveney that would be a double whammy indeed. The dark side of real estate syndication that nobody talks about

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @Mayur Gaitonde:
    Quote from @Chris Seveney:

    @Mayur Gaitonde

    Unfortunately in many of these situations you may actually owe taxes. The reason is the sponsoray have taken 100% depreciation or accelerated depreciation and they may have to be given back

    This is the double whammy of these types of deals.

    I would speak to your accountant

    @Chris Seveney that would be a double whammy indeed. The dark side of real estate syndication that nobody talks about


     That and the sponsors not doing a capital call but raising a debt fund that will have an equity position in that deal so they can continue to collect fees but now investors are further down the capital stack and more likely they will lose even more money....

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    The losses should be reported on the K-1's provided to you.

    [email protected]917-280-8544
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  • Bobby Larsen
    Investor · Newport Beach, CA · Member since 2019 · 190 posts · 176 votes
    2y
    Quote from @Mayur Gaitonde:
    Quote from @Chris Seveney:

    @Mayur Gaitonde

    Unfortunately in many of these situations you may actually owe taxes. The reason is the sponsoray have taken 100% depreciation or accelerated depreciation and they may have to be given back

    This is the double whammy of these types of deals.

    I would speak to your accountant

    @Chris Seveney that would be a double whammy indeed. The dark side of real estate syndication that nobody talks about

     The investment would either need to have A) collected a significant amount of distributions (cashflow) or B) had a lower basis from one or more previous 1031-exchanges. A is unlikely given GVA's value add approach. B will likely depend on if this was your initial investment with GVA or from a prior investment that sold and 1031-exchanged.

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  • Mayur Gaitonde
    OP
    Member since 2024 · 4 posts · 2 votes
    2y
    Quote from @Basit Siddiqi:

    The losses should be reported on the K-1's provided to you.


     I understand that but my question was more around what types of income or profit can they be deducted against.  I've heard some conflicting info here ranging from passive only to capital gains only to active income

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    If depends on your level of participation with the partnership / LLC.
    Since you are discussing syndication, it is likely a passive investment to you.

    Whether the loss is ordinary or capital will depend on the type of investment and the positions taken by the partnership and will be displayed on the K-1.

    There are further things to consider such as whether the K-1 is fully disposed of or not.

    [email protected]917-280-8544
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