All Forum Posts by: Nick B.

@Ashish Acharya,

Do I need to reconstruct previous K-1s for the first year only or for all missing years?

Is the following data sufficient for the reconstruction?
- 2019: initial capital contribution
- 2020-2023: no distributions, no contributions, no data
- 2024: beginning of the year capital balance of 35% of the initial, end of year balance of zero, non-recourse financing of 3 times of the initial capital, 1231 loss of 60% of the initial capital.

Thank you

@Josh Lewer: 

Thank you for your reply. Earlier today, I sent the link to the section of IRS publication that describes the penalties to the sponsor along with another inquiry to furnish the K-1. Still no reply. Looks like he doesn't mind if I report him...

Quote from @Basit Siddiqi:

Your best bet if you have a non-communicative Sponsor / CPA and you can't get past K-1's is to document your conversations where you tried your best to obtain the documents / K-1's.

You should then recreate your basis by your contributions / distributions / amounts reported on past tax returns.

If you want to completely write off the investment, you likely need some sort of support / evidence that you will not get any more money from the sponsor. A bankruptcy letter would suffice.

Thank you for your answer, Basit. 

I don't have my initial capital contribution mentioned in my previous tax returns because there were never a K-1 issued until 2024. 

That 2024 K-1 is marked as "final", so that should be a sufficient evidence of no future distributions, correct?

The loss on that final K-1 does not match my real loss (initial contribution) and that is my biggest issue. There is no other documents that would show where the difference went.

Quote from @Aaron Zimmerman:

This is crazy to not produce a k-1. Hopefully the partnership filed timely even if they didn't give a k-1 as it's a certain amount due for penalties per member per month. 

I would agree and contact an attorney to see if there's a case here, but this is not legal advice. 

That was one of my questions to that sponsor: did you file taxes on the partnership level for all these years? He ignored it.

Do you think threatening to sue him would produce any results?

Quote from @Chris Seveney:

@Nick B. Even if they are doing fine they should always be issuing K-1. How do you know if they're doing fine if they did not issue a K-1 or provide audited financials.

 Back in 2020 I didn't even know that K-1 was required for a company without revenues and very little expenses if any. The company was formed at the end of 2019 and only acquired land in that year or may be that even happened in the beginning of 2020. Then COVID started...

As for the guy, I watched him for the 5 years prior, spoke with many of his investors many times, and got to trust him eventually. 

Quote from @Chris Seveney:

Quote from @Nick B.:

The Story:

Back in 2019 I invested in a new construction of an apartment complex. 

In the spring of 2020 the sponsor informed investors that there would be no K-1 for 2019 because the company had no income. This was his CPA's advice.

Then in 2020 through 2023 the property was still under construction and still produced no income. Hence, the sponsor kept telling the investors that he would not issue a K-1 for each of those years because (you guessed it) there was no income.

In the spring of 2024 the project was foreclosed because the sponsor fell short of funds (cost overruns) and could not get a stop-gap financing. Investors lost all that they put into this project. 

In September of 2025 the sponsor sent out final K-1 for 2024 showing a 1231 loss which was 60% of the original investment. The capital account for the beginning of the year was something like 35% of the original investment and zero at the end of the year.

When I asked him to explain the difference, he quoted his CPA saying that final K-1 does not show the whole picture (duh!) and each investor must track their capital basis and similar truisms. In other words: a typical non-answer. 

He then kept ignoring my requests for the missing K-1s for the previous years.  

After reading IRS publications I found out that K-1s must be issued starting from the first year even if the company had no income. K-1 is not required only if a company also had no expenses. It is still recommended to issue a K-1 for the partners to keep track of their capital account ls and basis.

Based on that information, I need to either have previous years K-1s or establish my basis in some other way in order to properly write off my loss.

Questions:

How can I obtain the missing K-1s provided that the sponsor is not cooperating?

Would reporting him to IRS and SEC make matters better or worse?

What happens if I don't include that 2024 K-1 in my 2024 filings (besides not being able to claim a loss)?

Can I write it off as a worthless investment?

--

Nick

 Who was the sponsor so people can make up their own mind on whether to avoid this sponsor.

This seems like what Jay mentioned in that the sponsor knew all along they were going broke and did not issue k-1's, every year you should issue a K-1 even if no income. 

The sponsor was doing fine until 2023 or so. He had ambitious plans to get his AUM to $1B or so and started to pursue quite risky strategy of converting office buildings to apartments. That essentially destroyed his little empire. Search for Fort Worth oil and gas building foreclosure to find out more (I did not invest in that one).

That aside, how should I file my taxes correctly if I cannot obtain missing K-1s?

I can amend my tax returns starting from 2019 by making things up but that may cost me a lot more down the road. 

If I report this guy to the IRS, would that allow me to write this investment off as worthless or get some other relief?

Quote from @Jason Malabute:

Yes, you’re 100% correct — even if there’s no income, they should’ve still issued a K-1 for the previous years, and you’re also right that the basis is reported on the K-1 as well. I’m not a lawyer so I don’t give legal advice, but I’d definitely talk to a lawyer and see if it’s worth reporting him to the SEC. By the way, I’m curious — did you double check all your PPMs and the documents you signed when you first got into the investment to make sure this is a legitimate deal?

The deal is legit and the PPM was written by a well known securities lawyer. 

The sponsor used to be good until he overextended right to the point when many other of his deals started to crumble. 

The Story:

Back in 2019 I invested in a new construction of an apartment complex. 

In the spring of 2020 the sponsor informed investors that there would be no K-1 for 2019 because the company had no income. This was his CPA's advice.

Then in 2020 through 2023 the property was still under construction and still produced no income. Hence, the sponsor kept telling the investors that he would not issue a K-1 for each of those years because (you guessed it) there was no income.

In the spring of 2024 the project was foreclosed because the sponsor fell short of funds (cost overruns) and could not get a stop-gap financing. Investors lost all that they put into this project. 

In September of 2025 the sponsor sent out final K-1 for 2024 showing a 1231 loss which was 60% of the original investment. The capital account for the beginning of the year was something like 35% of the original investment and zero at the end of the year.

When I asked him to explain the difference, he quoted his CPA saying that final K-1 does not show the whole picture (duh!) and each investor must track their capital basis and similar truisms. In other words: a typical non-answer. 

He then kept ignoring my requests for the missing K-1s for the previous years.  

After reading IRS publications I found out that K-1s must be issued starting from the first year even if the company had no income. K-1 is not required only if a company also had no expenses. It is still recommended to issue a K-1 for the partners to keep track of their capital account ls and basis.

Based on that information, I need to either have previous years K-1s or establish my basis in some other way in order to properly write off my loss.

Questions:

How can I obtain the missing K-1s provided that the sponsor is not cooperating?

Would reporting him to IRS and SEC make matters better or worse?

What happens if I don't include that 2024 K-1 in my 2024 filings (besides not being able to claim a loss)?

Can I write it off as a worthless investment?

--

Nick

Thank you for your answers, @Scott Morongell. It all makes sense now.

Interesting perspective @Scott Morongell...

How do you value a piece of land at the time of purchase and at the time of sale?

Do you do anything with the parcel after you buy it? E.g., remove debris, add city water, change zoning?

Where does the price difference come from?

Thanks