How do GP pay structure get taxed

[Gaspare U.]

So when a GP in a syndication gets paid how are they taxed if the payment is:

• a fee (acquisition, refinance, etc)
• CF split

Also, does the GP get to benefit from depreciation in either of those? 

Thanks in advance!

[Brian Burke]

Fees are taxed as ordinary income.

Promote is taxed commensurate with the category of income. In other words, if the distribution came from operations, it would be taxed as rental property income. If the distribution resulted from sale of the property, it would be taxed as capital gain unless the sale of the property was ordinary income due to the nature of the investment (such as house flips, etc).  Certainly there are nuances here that matter so get the advice of a tax advisor for your particular situation and structure.

Some sponsors allocate some of the depreciation to themselves. Others do not—they allocate all of the depreciation to their investors. So this is up to you.  Keeping some depreciation for yourself could be a marketing challenge when other sponsors (your competition) aren’t doing that. My personal feeling is that if the investors brought the money, they should get the depreciation, but your mileage may vary.