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Tax Smart Real Estate Investors Podcast
350. What Every Syndicator Gets Wrong About Taxes, Funds, and Their CPA with MLRE
00:31:36
In this episode of the Tax Smart REI Podcast, Tho…
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Host - Tax Smart REI Podcast Announcer
You're now listening to the Tax Smart REI Podcast, the number one tax podcast.
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Host - Tax Smart REI Podcast Main Host
For real estate investors.
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
Your source for.
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Show Outro Announcer
All things real estate accounting and tax. Here we reveal our secrets that can save you thousands in taxes, streamline your accounting process and help grow your business. Stay tuned to hear insightful interviews with industry experts, successful real estate investors and current clients on what strategies they use to grow their business and how they steer clear of Uncle Sam.
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Host - Tax Smart REI Podcast Main Host
Thanks for tuning into this week's episode of the Tax Smart REI Podcast. Today we're joined with Matt Hamilton and Nate Sosa who co host the Major League Real Estate Podcast here at Whole cpa and we'll be covering real estate syndicates and funds, including what you need to know as it relates to tax issues and what most CPAs probably are not doing for you.
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Host - Tax Smart REI Podcast Announcer
Really excited to dive into all this.
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Host - Tax Smart REI Podcast Main Host
Because life is not just about short term rentals and we'll be diving to all of this in in just one second.
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Host - Tax Smart REI Podcast Announcer
After talking with clients and fellow real estate investors, one thing was clear. There wasn't a newsletter that delivered real market insights, concise decision making info and relevant tax strategy all in one place. So we created it. REI Daily delivers real estate news that won't put you to sleep. Real and concise market insights that aid in your decision making, legislative updates that actually impact your investments, and tax strategies sprinkled in because the IRS does not need a tip. If you're a real estate investor who wants to stay sharp without shifting through all of the clicks, clickbait or fluff, this is for you. And celebrate the launch. You'll have a chance to win a free one on one tax strategy call with one of our top real estate experts. No pitch, just strategy. Subscribe now by visiting www.therealcpa.com. subscribe again. You could subscribe now by visiting www.therealcpa dot com. Subscribe. We'll see you in the inbox. But now right back to the show.
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Host - Tax Smart REI Podcast Main Host
All right, and. And we're back. So you know we've covered a lot here on the show over the last few weeks as it relates to short term rentals, W2 tax strategies and things of that nature. But there's a whole nother side of real estate investing and the people we help here at Hull cpa and that is the private equity side, real estate syndicates and funds. So really excited again to bring on Matt and Nate here today to dive into that before we kind of dive into the nitty gritty. Matt, Nate, can you just kind of share a little bit of information on your background and what you guys have going on here at all. Cpa.
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
Yeah, so I can go first. So I'm the senior tax manager on the private equity team. So like you were saying, we have a whole div at Hall CPA that just focuses on our large private equity clients. So these are clients that have tens of millions to hundreds of millions in some case billions of dollars of assets under management and either individual syndications or funds. There's different structures. I fit in as a primary advisor for some of our largest clients. So they loop me into deals when they're trying to raise capital or, you know, do a 1031 exchange or whatever else into these larger commercial assets. So I help kind of guide our clients through that process as well as provide them timely K1s for all of their investors by 3:15 or whenever they need them. So that's kind of the team and sector of Hall CPA that I kind of work with and the types of clients I work with. But Nathan also has something super interesting that he.
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Nathan Sessa - Head of National Tax Group at Hall CPA
Yeah, so. So, so. Hey guys, My name is Nathan Sessa. I've been on here a couple times and love be. Oh, love always being on the podcast. And so I am the head of our national tax group and everyone goes, what is that? Basically I just help work with clients and work with Matt as well on clients when they have really complex issues that it's like, hey, we need to decipher this or look at the tax code and see what's going on. How can we optimize the strategy here and those types of items. That's really. And then also, of course, try to jump on social media every once in a while while also leading our IRS audit resolution group. And so we also do a lot of audits. We represent a lot of those folks and trying to help them keep their hard earned money with the IRS and try to get to either where they can win completely or we get to a good resolution with the IRS on that as well.
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Host - Tax Smart REI Podcast Announcer
Okay.
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Host - Tax Smart REI Podcast Main Host
All right, well, thank you guys for sharing that context. So for everybody who's here tuning in, I know we have various array of listeners here on the show. Some people just jumping into the game for the first time. Some people are very seasoned. So for those who may just be tuning in for the first time or relatively new, could you guys break down what you consider a real estate syndication and how it might be different from a typical partnership that people might enter into?
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
Yeah, so I always like to back that question up by just kind of broadly describing, like what is a syndication? Because theoretically you can syndicate any type of asset. It doesn't have to be real estate. Really all it is is someone who identifies an asset that has some sort of intrinsic value and they pitch that asset to other investors and say, hey, I have this great investment. We're going to acquire this asset for this price. I just need X amount of dollars from you. So you get a group of investors to pool their money together to jointly purchase this asset. Now, obviously, the way I describe that makes it very clear why this is very attractive in real estate. Because you have a single tangible asset that has intrinsic value, it has cash flow potential, it has all these different attributes. So you typically go out and you find a commercial property. Generally it could be multifamily, could be office space, industrial, whatever. You find an asset and you find investors to pool their money together to acquire and operate this single asset in an llc. And that's different from a typical partnership at a smaller scale because all of these investors, they're what are called limited partners or LPs, they have no management say in what goes on. They are simply investors and provide capital in the deal. Whereas, you know, at a smaller scale, maybe two people might get together to form a joint venture or a small 50, 50 partnership where each of them are sort of general partners and manage the partnership. This is kind of a different structure from that.
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Host - Tax Smart REI Podcast Main Host
Right, right. So in a syndication, someone's like, there's like somebody who's running the show, they're raising capital, they have passive investors. Whereas a typical partnership is like where everybody who's in that partnership is playing some type of active role in the deal.
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
Exactly. Yeah. So it'll, it allows you to create those passive investors which unlocks a ton of capital for syndicators who are trying to acquire these larger assets.
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Host - Tax Smart REI Podcast Main Host
Awesome, awesome. And now, and I know we can go a little bit beyond just syndication is typically like you mentioned, like a single asset. Like we have this apartment building that we're going to acquire, we're going to renovate it, and then we're going to sell it in five to seven years, whatever the timeline might be. And we're going to return the capital to investors and kind of move on. But then there's also the fund structure. Could you maybe break down maybe what the similarities are there and kind of what the differences might be?
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
Broadly the similarity. It functions very similarly where you raise capital from passive investors to acquire assets. But with a fund structure, it's a little bit different because you're not Acquiring one specific asset. Generally there are multiple assets, so the pitch is a little bit different to the investors. Right. So you're going to your investors and you're saying we have an investment strategy, we don't have an asset we're looking to acquire. We have a strategy where maybe we're going to acquire multifamily properties in this buy box in this market and you're going to add capital to the fund and we're going to deploy that to different investments that fit that criteria. So it's, it's a little bit more broad, a little bit more open ended. And if you're getting into that fund space, you definitely want to vet the people operating that because it's not as simple as saying like I'm investing in this asset and this asset I think is going to do well. You're really trusting the judgment of the people managing your capital and where they're deploying that capital into different asset classes.
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Host - Tax Smart REI Podcast Main Host
Makes a lot of sense. And as an investor or sponsor, how do you choose over the other?
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
It really. I'll answer that question in two parts. So as a sponsor, it really depends on how confident you are in being able to manage capital at scale. Operating a fund requires a different skill set than simply syndicating a single asset. Syndicating a single asset just requires you to find a good investment because if you find the property at a good price and you're able to outsource the management, that's kind of the extent of what you're doing because you're really getting people to invest in the asset. You're not getting your investors to invest in you as the fund manager. So that's kind of the difference there. But as an investor, same sort of difference, right? You have to do a little bit more due diligence. You're not investing in a single asset. You're investing in a fund manager who you believe would be a good steward of your investment, your hard earned money. And you also really want to vet the investment criteria in the types of assets that they're deploying your capital into.
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Host - Tax Smart REI Podcast Main Host
That makes a lot of sense. So with the kind of the foundation of what syndicates and funds are, obviously there's the host of tax issues. There's some similarities and some crossover with some of the things we talk about here on the show on Tax Moderator podcast a lot. But there's obviously some more unique issues or different things that syndicates and fund managers need that you might not see as an individual. So could we maybe break down or discuss a little Bit about what are the most common tax issues.
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Nathan Sessa - Head of National Tax Group at Hall CPA
Yeah, So a lot of them. Well, mostly the fear that they wind up facing is getting when do they get their K1s? Right. That's the biggest question that they get generally is when, when can I get my K1? Which doesn't. Isn't a quote unquote tax issue, but it's a question that a lot of investors get. And so actually Matt and I just had an episode last week talking about how to make sure if you want K1s on March 15, how we can make that happen. But that's one. The next one is operating agreement. Right. Unfortunately, it's a legal document that generally has to be drafted by attorneys, then reviewed by a CPA or tax pro. And in that, there's a lot of times where that language doesn't get reviewed and you can write something or it can be a. Even kind of what I say, like a templated document sometimes that doesn't get reviewed and nobody knows the consequences. Or there was a specific outcome that a sponsor, maybe even an LP investor, wanted out of the deal, but aren't going to get the results of that because that was never reviewed and that was never seen. And so that's one of the biggest issues to look at is looking at the operating agreement and seeing how, what lines out there, how's depreciation allocated, one of distributions done, how are they done?
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Host - Tax Smart REI Podcast Main Host
Right.
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Nathan Sessa - Head of National Tax Group at Hall CPA
All those types of. What is the preferred return?
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Host - Tax Smart REI Podcast Main Host
Right.
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Nathan Sessa - Head of National Tax Group at Hall CPA
So essentially that. Matt, what else can you think of there for operating agreements?
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
I mean, that's a lot of it. I think the big thing to point out about operating agreements, and this is why it's so critical to loop in a CPA is, is you can really write whatever you want in an operating agreement. So an operating agreement is basically a blueprint for how the LLC is going to operate and for tax purposes, how it's going to allocate its tax income and loss to all of its investors and the gp, the syndicator themselves. And you can really write whatever you want. You can say that like I, as the gp, get all of the depreciation and everything else is allocated to the investors. You can write that, but that doesn't mean the IRS is going to respect the tax implications of that because there's guidance on how partnerships can and cannot allocate tax losses across its investors. So the biggest thing when you're getting into the syndication space or the fund management space is that you really want to have an ironclad operating agreement that's been reviewed by both your attorney and your CPA to ensure that there aren't any surprises at tax time. And when you file the return for the fund or the syndication, everyone is receiving their K1, and it's what they expect. And one other thing, while I'm on the subject, what the heck is a K1? So many of you, you're used to making investments in brokerage accounts, or maybe you have a savings account. You receive a 1099 that's reporting your taxable activity from your interest income, your dividend income, whatever else. A K1 is a tax document that you receive that effectively reports your share of taxable activity from this investment. It's a little bit different, a little bit more complicated, but at a high level, it's very functionally similar to a 1099. So you need the K1 from this investment in order to file your return because you need to report that activity on your personal tax return.
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Host - Tax Smart REI Podcast Main Host
So basically, I kind of like to summarize this here. It's like, from a sponsor standpoint, when you go and you want to do one of these investments, you're going to be setting up an llc, typically tax as a partnership, and our partnerships file form 1065, and partnerships typically do not pay taxes. Right. It all flows down through to the individual partners via the schedule K1. The K1 is what's reported on the investor's tax return. As a sponsor, you want to make sure that that operating agreement, which governs how that tax return is more or less going to be prepared for lack of a better way to put it, but is going to allocate different income and losses and depreciation, so on and so forth, to their investors. You want to make sure that you have somebody who's putting eyes on that to make sure that the operating agreement reflects what you really want the outcomes to be.
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
Yeah, 100%. And one other critical piece of that operating agreement is outlining who gets the cash, who gets paid, because oftentimes with your investors, part of the pitch is that, you know, when you invest in this asset, you're going to receive a preferred return of, I don't know, 6, 10, 20%, whatever that number is, as well as the full return of capital if the asset does well. So you want to put that in writing in the operating agreement as well. If you're looking to invest in one of these syndications, when you review the private placement memorandum, which is the piece of the OA that you signed, the PPM or the OA itself, you really want to make sure that whatever the syndicator or the fund manager told you is going to happen with the cash. You want to make sure that that is actually in writing and you are actually guaranteed that cash.
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Host - Tax Smart REI Podcast Announcer
Hey, real quick, if you've been a long time listening to the show, then.
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Host - Tax Smart REI Podcast Main Host
You know we give everything away for free from how to use the real.
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Host - Tax Smart REI Podcast Announcer
Estate professional status and the short term rental loophole to save tens of thousands of dollars on taxes to upcoming tax changes, including the potential return of 100% bonus depreciation. We don't hold anything back. And the only way we're able to help more real estate investors is if you rate, review and share the show. It just takes 15 seconds to leave a quick rating review or share with a friend who may find this information useful on their real estate journey. That's all for now.
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Host - Tax Smart REI Podcast Main Host
We'll dive right back into today's episode. So I know there's syndicates and funds going back to. There's some nuances there. Is there anything that fund managers have to be concerned with? Maybe as it relates to the, the oa, the ppm, the partnership returns that a syndicator that a single asset syndication might not have to worry about?
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
Yeah, so there, there's a lot of differences between syndications and funds. There's a lot of similarities, but a handful of specific nuances that kind of make it more complicated. The big thing is every fund is what we would call either an open fund or a closed fund. An open fund is a fund that continuously raises capital throughout the life of the fund. So if you have a successful investment strategy and more people want in, you can raise more capital and deploy more capital and kind of operate that way. That also creates an issue of having revolving doors of people wanting in and out throughout the life of the partnership. So that's kind of an open fund. A closed fund is the opposite of that. You raise capital once and you don't raise capital anymore. And this is great. It gives you a lot of flexibility, but there's a lot of tax nuances there. Just for one example, let's say that you have a fund, you raise a ton of capital and you acquire one asset. And that asset because of 100% bonus depreciation that was just brought back in the big beautiful bill, there's a ton of bonus depreciation going to all of the investors. That's great. But now let's say in year two or three, you want to raise more capital from new investors to acquire a second property. Well, eventually, if the fund sells the first property, there's depreciation recapture. You want to make sure that the new investors aren't on the hook for picking up depreciation recapture income for depreciation that they never received. So there's a whole bunch of additional reporting requirements to make sure that no one is on the hook for someone else's tax benefits later on down the line. And that's just one example. There's a handful of other nuances there, but that's the biggest one. Especially in real estate, you want to make sure that people are not picking up depreciation recapture income for depreciation that they never received. And that's not an issue in a single asset syndication because it's very straightforward. You know, there's one asset and a handful of investors.
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Host - Tax Smart REI Podcast Main Host
Makes sense. It sounds like this is a little bit more complex than just tax returns when it comes to, like an accounting perspective or tax perspective, rather. Am I, am I missing something here?
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
No, that. That is absolutely true. If you were going into a fund or a syndication where you're trying to start this because you're starting a business is what you're doing. You're starting this business where you're operating this real estate at a high level with a lot of other people's money, you have a fiduciary obligation to be a good steward of all of that capital that you've raised. Which part of that is having accurate records? It's not sexy, but it's really important to have good bookkeeping and accurate records so you know who has been allocated what, who has received what cash, what cash. You know, everyone has contributed who's owed X amount of dollars. Because when you're, when you're operating with millions or tens of millions of dollars, it's really important that you really have that on lock and there aren't any issues because you know, the more capital you raise, the higher the risk of lawsuits and litigations if things go wrong. So it's really important that you have that accurate record keeping.
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Host - Tax Smart REI Podcast Main Host
Couldn't agree more. As someone who invests in limited partnership interests, like, you have to be as a sponsor, you have to be organized, you have to be diligent, you have to do things the right way. When it comes to taxes and accounting, it's not just about getting K1s out to investors. That's important. Don't get me wrong, please don't get me wrong. But oftentimes I speak to syndicators on whatever side of the coin you want to look at it. And when it comes to tax, it's all about the K1, or it's all about how bonus depreciation is allocated. But there's obviously a lot more that goes into it. So when it comes to, like, looking at CPAs to help you with the syndicate and fund, what should syndicators and fund managers be looking for in a CPA beyond just the tax return?
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
I think it's really important to look at their understanding of the economics of the deal and their understanding of how the tax implications fit into the economics. If you're trying to find a CPA and you ask them like, hey, I, you know, I'm the sponsor of this deal, I want to be allocated 100% of the bonus depreciation. And if the CPA you're talking to says, okay, sounds great, we'll make that happen, that's probably a red flag because there's a lot of nuance and a lot of structuring that has to go around to make that happen. It's not as simple as just checking a box and making sure that things are happening. So you really want to make sure that you're working with a CPA who understands the nuance of the economics and the nuance of how the tax sort of follows the economics. Because ultimately, if the IRS comes knocking and wants to audit your partnership, not only is this not great because you have an IRS audit, but also you have a tax return that's going to impact all of these investors. And you want to have a reputation with your investor pool as someone who is a good steward and making good ethical decisions with the professionals you're working with. And that can really put a stain on your reputation. So you really want to think carefully about which professionals you're working with long term as you're looking to grow in the syndication space.
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Host - Tax Smart REI Podcast Main Host
Absolutely. Nathan, you have anything you want to add there?
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Nathan Sessa - Head of National Tax Group at Hall CPA
Yeah. So going beyond the tax return here, right? Not just like, what. What kind of advice do you provide? So, like, hey, like, Matt brought up a great point like, how are we following the economics of this deal? And a lot of times you hear people say, is that like, oh, hey, you can just allocate depreciation however you want. Right. That's the biggest question we generally see is, oh, yeah, we can allocate. I can just allocate depreciation or all I do is guarantee the debt, right. If I just guarantee the debt, that means no big deal. Now, I mean, I can. That. That person, one person can receive 100% of the depreciation. And there's a lot of nuance. Right? The whole point is like look, there's not sure. Nowadays partnership audits are a rather low rate, right. They don't happen, but they're at a low rate. But if you do, the IRS is going to have someone who knows their stuff assigned to that case and they're going to have someone that knows what they're doing. And so you want to make sure you're bulletproof. Also the state's audit partnerships too. And a lot of times they follow the federal treatment. And so sometimes the state agencies are a little bit more that their audit rate is a lot more increased. And so you want to make sure that you have in the operating agreement it is bulletproof and it follows the tax allocations. Right. That it can be honored by the tax code and follows tax allocations. Right. We just had a drop and swap case that happened in New York. Doesn't apply to the rest of the country, unfortunately. But they use all the exact same contents from a federal perspective. Thankfully, they followed all the right treatments and they had all the right proper documentation. They worked with a good advisor on the front end to accomplish this and then defend it in court. So that's so important that you have someone like this when you're doing complex transactions. And guess what? If you're dealing with a fund, if you're dealing with several million dollars, guess what? You're not. You don't have something simple anymore.
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Host - Tax Smart REI Podcast Main Host
Right.
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Nathan Sessa - Head of National Tax Group at Hall CPA
You have gone past even a sophisticated investor. You've got to step beyond that, above and beyond that. So you want to make sure that you have someone that understands it doesn't just say give you yes or no or I'll do whatever you want. They're there to help protect you both from yourself sometimes and from the irs. And so how can we do how like what happens if we do a profits interest here? Right? What happens if we, if we, if we issue out of profits interest to someone? Or what happens with the carried interest in five years from the when everything goes, goes full sale or hey, did anyone think about depreciation recapture? Can we even do a 1031? Is that in the operating agreement as an option? Right. What happens with our 74 elections? Right. That's just some of the lists that, that like Matt and I go through sometimes when we deal with these types of these issues. So there's a lot, right. But you want to make sure you have someone who can deal with that. Some of those are easy, some of those are not easy. But that's where you get the nitty gritty of the advice Right, Sure. You can go ask ChatGPT how to help you advise that too. Right. And write up that document. Absolutely. Guess what?
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Host - Tax Smart REI Podcast Main Host
I better not find out someone's doing that. Otherwise I'll never go.
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Nathan Sessa - Head of National Tax Group at Hall CPA
Not our clients. But you know what, someone can go do that. But I guarantee you it's not going to understand the nuance or it's going to give you half of the nuance that's necessary for it.
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Host - Tax Smart REI Podcast Main Host
Yeah, no, absolutely no. That's phenomenal. And something else too. It's like when you're a syndicator, like you said, you're going beyond just being a sophisticated individual investor. You now are the steward of other people's hard earned money. And if you plan to be in this business and be in it for a long time, reputation is everything. One bad deal, one oversight can sink your ship quickly and it can be very difficult to recover. You know, like Benjamin Franklin says, an ounce of prevention is worth a pound of cure. And imagine a situation where you don't get this right the first time you decide to skimp out a little bit on, on going with the cheapest CPA you could find just because you know, you want rock bottom prices. But say you have 50 investors or 100 investors and all of a sudden you have to amend the partnership return or the partnership return has to go through an audit, years later, you're now impacting 25, 50, 100, however many investors, tax returns, and they're not going to.
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Host - Tax Smart REI Podcast Announcer
Be happy about that.
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Host - Tax Smart REI Podcast Main Host
Let me just be, let me be honest. There's not. So I think, I think especially, you know, for the newer syndicators, I think you really have to look at. This is not just when you're looking for CPAs, when you're looking on the tax and accounting side of your syndication. It's not all about, you know, finding a CPA 5 to me or file and tax return and move on. You really need to be strategic and really need to start acting like a steward of your investor's capital and making sure that you have the right people on your team who can help you do the things the right way the first time to ultimately protect your reputation and your investor's capital.
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Nathan Sessa - Head of National Tax Group at Hall CPA
Right. I actually that's a great point. Thomas. He's hitting on the reputation piece. Right. And so that's super important to have someone that can not only speak to your investors well, but if they have questions, but it's also ensuring that you're doing things above board. Like, and Matt said that a bunch of times, is that reputation is how a Lot of these syndicate is how, it's how syndicators. Right. That's like a lot of you, you've built this, it's something, it's probably your most, it could be your most valuable asset in all honesty. And you want to make sure you work with someone.
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Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
Sure.
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Nathan Sessa - Head of National Tax Group at Hall CPA
Maybe you understand or maybe you understand enough, but you want to have an advisor that gives you the right answer to help you protect that because it's so important. Right. Like you just mentioned that situation where you have to go back two years, refile tax terms, do that. Right. That's worst case scenario. But no one's happy about that. And then that, that creates a quote unquote stain. And now people does. If you have a new deal coming up, those, anyone who is involved with that has bad taste and now they're thinking about not doing it again. And that's why if you work with someone like Matt, they're going to make sure that doesn't happen or they're going to have ways to clean it up if something like that did happen down the road too.
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Host - Tax Smart REI Podcast Announcer
Right?
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Host - Tax Smart REI Podcast Main Host
No, it's, it's super important. I think a lot of times people overlook this and especially new syndicators jumping in for the first time just tend to think, oh, I just need my K1s filed and, and I'm all good to go and I don't need anything else. And that's just not, not the case. And you, you want to make sure you're, you're, you're doing this right. So just kind of changing gears just a little bit. I know you both host the Major League Real Estate podcast, which is out now on Apple, Spotify, at YouTube and wherever else podcasts can be found. Could you kind of just give the listeners a little bit of information on what you guys talk about on that podcast, Maybe a few highlights on why somebody tuning into this episode might want to go check out the Major League Real Estate podcast.
- [24:47]
Nathan Sessa - Head of National Tax Group at Hall CPA
Absolutely. So I think we're at, it's like 18 episodes at this point, which is crazy to think about. It's flown by for us, but we bring on awesome guests. We all bring on other fund managers who either just starting or are in the full swing of things. We just talk to them, hear their story, how do they do it, and then ask them what's the biggest question, like what would you give to someone who's first getting their feet wet as being a syndicator, fund manager? Or what are the biggest lessons you've Learned in the 5, 10 years you've been doing this, right? And I'm just like, try and understand them. We also bring on people that can help the syndicators, right? We bring on CRE brokers, CRE insurance managers, right? Those types of folks who also. And like I talk to them and ask, hey, what can you do that would help assist the syndicator and why and why is what you do so important? And what, what should they look for when they're looking to have someone help them with that? Right? That's what we do. And then of course Matt and I love to know about tax. And so we dive into the tax situations and the implications, but bring it back to what's important to a syndicator or fund manager and how they can take that and apply that to themselves and also give advice and like, hey, you should have this 1031 clause in your OPERA agreement. Or just remember that these drop in swaps exist and here's how you need to do them if you want to do them appropriately. That's kind of what we cover. Matt, what else do you think's out there?
- [25:58]
Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
You really covered a lot of it. But one other thing that I do want to talk about is that a lot of partnership tax and a lot of the tax that relates to syndicators and fund managers is very, very complicated. You cannot learn it in a day. You cannot teach yourself via ChatGPT over a short span of time. It's a lot of information that we try to break down into small digestible chunks. Our goal is to have the fund manager walking away with enough of an idea of what they're looking for so they can ask their CPA about it and make sure that they're in good hands or if they're looking for a new cpa, what to ask them to ensure that they, you know, they know what they're talking about. So that's a big piece of it. And like you said, some of the guests we've had on have been, have been great. And I know we have a great lineup of guests coming up. It's really cool to hear from actual syndicators and fund managers and sponsors, their experience in where they've been, how they've gotten, where they're at, hearing about some of the mistakes they've made along the way and how they've grown from it. It's really interesting to hear and I think it's really helpful for people trying to get into the space, just trying to learn from other people.
- [27:04]
Host - Tax Smart REI Podcast Main Host
Yeah, it makes a lot of sense. And I know you guys mentioned you have 18 episodes out right now. What is your. You guys do it weekly, right?
- [27:10]
Nathan Sessa - Head of National Tax Group at Hall CPA
We're a weekly podcast. We're probably going to take Christmas off, but that's the only week of the year we're going to take off, just FYI. We're like, where we're following the footsteps of this amazing podcast. And so we want to be weekly. We want to be there for everybody.
- [27:23]
Host - Tax Smart REI Podcast Main Host
Okay. And for everybody tuning in right now, who should be listening to this? Obviously, syndicators and fund managers should be tuning in. I guess the aspiring too. Anybody else or did I miss anything there?
- [27:32]
Nathan Sessa - Head of National Tax Group at Hall CPA
Anyone likes to learn about tax too, right? Whether or not you're a tax pro or not a tax pro, you just like learning a little bit more about how partnership taxation works and the implications and the items that go into it. That's who should tune in and give a listen as well.
- [27:47]
Host - Tax Smart REI Podcast Main Host
Well, thank you both for joining the show today. Really excited to put this out there. We're gonna drop the link to the Major league real estate pod down in the show notes, but again, it is available on Apple, Spotify, YouTube and pretty much wherever else podcasts can be found. So if you are a syndicator, fund manager and you're interested in that type of discussion, I encourage you to go check out that show. Really thankful to have you both on again here today. Any final words before we wrap this one up?
- [28:12]
Nathan Sessa - Head of National Tax Group at Hall CPA
This is something that I find a lot of people think I'm too small, right? They say I'm too small or something like that. I'm like, look, if you're syndicating a $500,000 asset, guess what? You've become a syndicator. There's no too small. And all of the things, all the complex things we talked about today and brought up, those now apply to you, just FYI, right? So it doesn't matter. So whether you're doing 500,000 or 500 million, all of that matters. So don't think you're too small when it comes to tax, because whether or not the size of the investment you're dealing with, there are definitely tax implications that are involved there. So size or number doesn't matter either. It just matters like, hey, are you stepping into the partnership tax realm? And if you are, I think we are a good place for you to give a listen.
- [28:50]
Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
Yeah, no, I just want to kind of echo that. It's really important to make sure that you are finding the professional guidance and assistance you need when you need it. And when in doubt, it's always better to have better guidance early than too late. So it's never too early to start looking into it.
- [29:08]
Host - Tax Smart REI Podcast Main Host
Yeah, 100%. Like Stephen Covey says in the Seven Habits of Highly Effective people always begin with the end in mind, right? So you want to get that ball rolling sooner rather than later. So yep, that's it for today's episode. We will be back next week with an episode on Year end tax strategies for anybody who does want to wrap up 2025 strong. We are still accepting clients for the 2025 tax year and I always say that Q4 is actually one of the best times to get started with tax strategy and planning because you get to wrap up the current year, finalize that, make sure you're taking advantage of whatever might be available to you, but then also really get a head start on the following year. So great time to get started. If you've not already got that conversation started with us, you'd follow the link in the show Notes to this episode. That'll be linked up there too. That's it for today and we'll catch you on next week's episode of the Tax Mar Podcast.
- [30:07]
Host - Tax Smart REI Podcast Announcer
The Tax Smart Real Estate Investors Podcast is for general information purposes only and is not intended to provide and should not be relied upon for tax, legal or accounting advice. Information on the podcast may not constitute the most up to date legal or other information. No reader, user or listener of this podcast should act or refrain from acting on the basis of the information on this podcast without first seeking legal and tax advice from counsel in the relevant jurisdiction. Use of an access to this podcast or any of the links or resources contained or mentioned within the podcast, show or show Notes do not create a relationship between the reader, user or listener of the podcast and the host, contributors or guests. Any mention of third party vendors, products or services does not constitute an endorsement or recommendation. You should conduct your own due diligence before engaging any vendor. For more information, reference the show notes or description of this episode.
- [30:55]
Show Outro Announcer
Thanks for listening to today's show. If you enjoyed the show, please find us on itunes and leave us a review. You can also email us@contactherealestatecpa.com with any feedback or topic suggestions. We are always taking on new clients and with the new tax laws in play. You you really don't want to navigate this alone. Let us help you save money on taxes with your accounting and CFO needs to become a client. Navigate to our client page@therealestatecpa.com and fill out a web form with as much detail about your situation as possible. Thanks so much for listening.
- [31:31]
Matt Hamilton - Senior Tax Manager, Private Equity Team at Hall CPA
Have a great rest of your week.