All Forum Posts by: Scott Johnston

The plan would be to return their initial investment with the refinance proceeds. Wouldnt this return their unrecovered capital contribution which would lower their basis? If its strictly a return of initial capital wouldnt that not be taxable? And if we return all their investment they would be left with zero interest so any additional distribution given to the LPs beyond this point from the refi would not be taxable but the GPs would deal with the tax implications upon sale in a later year.

@Brian Burke what if the LPs were bought out at the time of the refi? Would that share of tax due then fall on the GPs when they sold in a later year and the LPs would not owe any tax on that 50k?

We are looking at building a model where we refinance to pull cash out and return capital to LPs. Typically cash out from a refinance is not taxable but does it become taxable if excess is given to LPs beyond their initial investment? 

Simple Example - LPs invest 100K. Refinance pulls out 150K and given all to LPs. Will the additional 50K be taxable? Do the tax implications change if LPs still maintain some ownership after receiving the 150K vs being bought out with no remaining ownership? I imagine GPs will be effected at the time of sale at a later date when determining basis etc.

Thanks