All Forum Posts by: Roy Mitle

I invest in syndicates that invest in appartment buildings. The usual: buy, rehab, sell back.

I'm curious if there is any opinion on the impact of bank collapses and CRE challenges pertaining to offices (due to hybrid WFH, increased rates) has on the outlook for appartment building syndicates. These are also clubbed as CRE (which I didn't know till sometime ago).

I have 2 different types of investments

a) rental - keeps on giving me passive losses because of depreciation

b) K1 syndicates - give me passive losses till they liquidate at which time I get a Long-term capital gain and a cumulative passive loss that I can now realize as income loss on schedule 1 that ultimately flows onto 1040.

If I invest in an asset that gives me passive income (call it c), can I use that passive income to offset (a) rather than (b).

Why am I asking?

I plan to keep (a) and pass onto heirs. If I can offset my passive income (c) vs (a), then my passive income will be totally tax free. With (a) I don't worry about depreciation re-capture since I pass onto heirs. 

Examples of passive income

* Invest in ATM machines - I get income every month, after 8 years my capital is gone so I get Long term capital loss after 8 years. The income I get every month is passive income.

BTW, on a separate question - do you guys know any places to get passive income without headaches. Real estate - difficult to get passive income stress-free.

 Ok. I get the depreciation aspects. 

However since the accumulated passive losses ultimately do end up on 1040 as losses they do get converted to active losses. They do end up lowering your income. So that’s great 

Ok so this year I got my final K1 and I think I know how this work (my bad in that I thought last year was final K1)

To confirm in final K1, all the passive losses can now be taken and they come to schE as allowed passive losses. Before final K1 they just get carry forward.

Since they are now allowed, they go to sch1 line5 (from schE line 41) and now they can offset active income (I get pension so line t on schedule 1)

Would love to get confirmation @Michael Plaks

If this is true a sound strategy is to get bonus depreciation to get as much loss as possible (which gets to reduce my pension income) and as much sec1231 gain (which becomes cap gain)

One of my friends has a property under lock and is looking to raise a syndicate. He needs to raise $13M and claims he is investing $1M of his own money. The property will be held as tenants in common and is located in Texas, Houston area. The financials do work out with CoC of 2x conservatively estimated.

a) How can I trust he is putting in $1M of his own money.

b) I have done LP deals in professionally managed syndicates by PE firms before. First time doing Tenants in common. Are there things I need to watch out for

c) Any other things to be careful about investing with a first time syndicate

Thanks Bill

The taxable income will happen when my income is much lower (during retirement).

I have a rental which has accumulated a lot of losses on schedule E. Mainly due to depreciation. I intend to not sell the rental and pass it on my kids. In that case they will get step up basis and won't have to care about depreciation recapture

So I am left with this massive carry forward losses.

In order to use that I think if I can get passive income then the passive income becomes tax free to me.

So how do I get passive income which comes on a K1. (Passive income which comes as stock dividends etc. is not useful to me for this purpose since that goes on schedule D). If it comes on a K1, I can put it into schedule E and offset my losses from my rental.

Is my thinking correct?

@Michael Plaks

I misspoke, it doesn't say final K1. The sale is investment sale. We had one part sold last year and another this year. So I'll probably get "final K1" next year.

#2. Is this true. So the syndicate did a partial sale - investment sale. This can offset my passive activity loss. I didn't find anything in the IRS instructions. Would love to get more clarification. Thanks!

I invested 50K in a syndicate. They used cost seggregation and put 50K as losses in year 1.  This showed up in box2 of K1. My CPA put that as loss in my tax return and carried it over.

Next year they sold the property for a gain of 32K. They put that 32K in box 10. I also see 5K as rental income loss in box 2 of the K1.

My CPA says that 32K is section 1231 gain and so goes into capital gains

However, I feel the box 10 gain should go against my loss of 50K +5K from box2. So I should not be paying any extra taxes. The syndicate agrees with my position. 

In a nutshell, can I offset my gain in box10 with loss from box2 and other passive activity losses (eg. I have a rental property that has passive carryover loss ~125K from years of depreciation)

I have a rental property and used to use Cozy.com to get the renter to send the rent. It was very convenient.

Cozy got bought by apartments.com. That was all fine.

Now apartments.com emailed us "

The IRS lowered the threshold for 1099-K reporting. Please provide tax information for your receiving account(s).

"

I'd like to just go with someone else. Is there some free service like cozy where renter can just send money and then we link to our bank account.