LIHTC Property Question

4 Replies

Hi Everyone first post here. I'm looking to acquire the interest in a RD Senior Affordable Housing project.  The project is owned by a group of General Partners who are also the Limited Partners.  It was first placed into service in 1990.  I trying to understand what tax liabilities the partnership might be facing if they sign their GP interest and eventually their LP interest over to my entity.  I know the building was built for about $775,000 and they currently have a RD mortgage for $680,000.  They have taken about $500,000 in depreciation expenses and they currently have a negative capital account for the partnership totaling around $500,000.  If my entity acquires the GP interest, I know we work with RD to assign the loan over to us and I'm looking to acquire the property in addition to the mortgage assignment of about $1000/unit, so $24,000.  I'm wondering if anyone knows with the numbers given, what tax liability the current partners would have.  I ask, because the current GP I'm speaking to, said he isn't interested in selling if he is going to be facing a large exit tax burden...I'm hoping to get some info I can share with him that might motivate him to sell.  Thanks for any help.  

If it's a tax credit deal, there would have been a regulatory agreement executed as part of the loan docs. There should be a section that discusses sale of the property. You should review this document. Better yet, have an attorney review the loan docs to be sure. 

Thanks for the feedback.  Unfortunately I don't have access to the loan docs.  I have the latest audit, partnership agreement and financials for the property.  The partnership agreement has a section about Sale of the Project, but it just states that if the project is sold, the partnership is terminated.  

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If the project was placed into service in 1990, the GP should be out of the 15-year compliance period.  As for the tax implications, that's impossible to really know without knowing their cost basis in the project, but from a LIHTC perspective they should be fine exiting the partnership

Eric  has a good point. I'm marketing  similar deal. I encourage buyers to research the regulatory agreement. 

Originally posted by @Eric Schleif :

If it's a tax credit deal, there would have been a regulatory agreement executed as part of the loan docs. There should be a section that discusses sale of the property. You should review this document. Better yet, have an attorney review the loan docs to be sure.