Tax Implications for Limited Partners in multifamily syndications
First of all, thank you 🙏 much for your time in advance helping me understand the tax implications for multifamily syndication deals.
I would like to be informed as much as possible so I could answer any questions for my potential passive investors in the future. I know I dont need to know everything but that doesn’t make a good excuse since passive investors/ limited partners trust in you first before the deal itself.
Ok, thats too long for intro.
Sorry for multiple questions. I could find consistent answer from google as tax questions can be complicated.
What does a limited partner have to know about tax implications in a real estate syndication in general?
1. What are the returns for LP tax exemption at the sale or income monthly or quarterly from their pref return?
2. At the end of investment, capital gain from the sale will be taxed at 15%-20%. How could a LP avoid? 1031 exchange?
3. Plus the NIIT of 3.8% if applicable. E.g. Married filing jointly, $250,000 for those tax bracket 32% high income passive investors?
4. LPs will also pay depreciation recapture tax (up to 25%)
5. Does the return on investment deck prepared by operators usually include these tax implications on the return?