‘How to Maximize Tax Savings in Real Estate Syndications’ with Ryan Bakke and Austin Prevost

In this episode of the Raise Capital Legally podcast, Attorney Kim Lisa Taylor interviewed  Austin Prevost and Ryan Bakke, CPA, about the complexities of taxation for Limited Partners (LPs) and General Partners (GPs). Topics covered included key differences in how LPs and GPs are taxed, strategies for tax savings, and the impact of state taxes. Austin and Ryan also shared their expertise in managing both partnership and individual returns, offering valuable advice for anyone involved in partnerships or syndications.

Introduction and Real Estate Professional Status Requirements

Kim introduced the topic of taxation for LPs and GPs in syndications. Ryan explained the two key criteria for real estate professional status: 750 hours annually in real estate activities and spending more than 50% of working time in real estate business.

Cost Segregation and Tax Benefits (00:15:24)

Ryan described cost segregation as allowing investors to accelerate depreciation deductions, typically accessing 25-30% of total depreciation value in the first year instead of spreading over 39 years. Austin explained how this can be particularly beneficial when combined with real estate professional status.

Structuring Syndications for Tax Efficiency (00:30:15)

Kim outlined the recommended structure using an investment level LLC with Class A and Class B interests, and a separate management entity. This structure helps characterize earnings appropriately between active management fees and passive investment income.

Carried Interest and Fee Treatment (00:45:30)

The experts discussed how carried interest allows recharacterizing what would be ordinary income into capital gains. Ryan explained strategies for GPs to minimize taxes on acquisition fees by reinvesting them into deals as Class A interests.