Tax Smart Real Estate Investors Podcast

Episode 350: What Every Syndicator Gets Wrong About Taxes, Funds, and Their CPA with MLRE

Date: October 21, 2025
Host: Hall CPA
Guests: Matt Hamilton (Senior Tax Manager, Hall CPA), Nathan Sessa (Head of National Tax Group, Hall CPA)

Episode Overview

In this episode, the hosts dive deep into the critical tax considerations, fund structures, and common misconceptions that real estate syndicators and fund managers encounter. Matt Hamilton and Nathan Sessa, drawing on their experience advising high-value real estate clients, break down what separates a robust syndication or fund operation from the rest—especially when it comes to tax strategy, operating agreements, investor relations, and CPA selection. The conversation provides actionable insights for both new and seasoned real estate investors looking to understand the unique compliance and planning demands of syndicates and funds.

Key Discussion Points & Insights

1. What is a Real Estate Syndication? (04:24–06:00)

• Definition & Structure:
  Matt explains syndication simply: "All it is, is someone who identifies an asset...and they pitch that asset to other investors...to pool their money together to jointly purchase this asset." (04:24)
• Comparison with Partnerships:
  In syndications, most investors are passive (limited partners) with no management say, unlike typical partnerships where all members are active.

Notable Quote:

“You can syndicate any type of asset. It doesn’t have to be real estate…but obviously this is very attractive in real estate because you have a single tangible asset with intrinsic value and cash flow potential.”—Matt Hamilton (04:24)

2. The Fund Structure: Similarities & Differences (06:09–08:26)

• Syndicate vs. Fund:
  Funds are broader: instead of pooling capital for one asset, the money is raised for a strategy or portfolio. Investors must do more due diligence on fund managers since they're investing in both the manager and their approach, not just a single asset.
• Sponsor and Investor Perspective:
  Sponsors need more robust asset management skills in a fund. Investors, in turn, must be sure the manager can be trusted with wider discretion over their capital allocation.

Notable Quote:

"Operating a fund requires a different skill set than simply syndicating a single asset. You’re really getting people to invest in you as the fund manager, and not just the asset."—Matt Hamilton (07:29)

3. Most Common Tax Issues for Syndicates and Funds (08:26–11:50)

• Key Concerns:
  • Timely K-1 delivery is the most common question for syndicate investors.
  • Operating agreements (OA) are critical; boilerplate or poorly-reviewed OAs can derail tax outcomes.
  • The importance of having both a legal and CPA review of OAs to avoid unexpected tax results at return time.

Notable Quotes:

"You can really write whatever you want in an operating agreement… but that doesn't mean the IRS is going to respect the tax implications."—Matt Hamilton (10:05)

"The biggest question…is, when do they get their K1s? ...But the next one is operating agreement."—Nathan Sessa (08:54)

4. K-1s: Role and Relevance (11:50–12:34)

• What is a K-1?
  Functions similarly to a 1099 but details each partner’s share of income, losses, and deductions. Investors need this to file personal returns.

5. The Importance of Well-Drafted Operating Agreements (12:34–13:21)

• Money Flow & Tax Allocation:
  OAs should clearly spell out who gets the cash (e.g., preferred return) and how depreciation, losses, and profits are allocated among partners; this should match what's been promised to investors.
• Alignment between Pitch and Legal Documentation:
  Private Placement Memorandums (PPMs) and OAs must reflect the actual deal terms promised by the syndicator/fund manager.

Notable Quote:

"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..."—Matt Hamilton (13:21)

6. Fund-Specific Tax Nuances (14:07–16:06)

• Open vs. Closed Funds:
  Open funds can accept new investments over time, which impacts tax allocations and creates complex scenarios like ensuring new investors don’t unfairly assume recapture on past depreciation they never benefited from.
• Complex Allocations:
  Especially important with multiple assets and rolling admissions or redemptions; specialized reporting is needed.

Notable Quote:

"You want to make sure that people are not picking up depreciation recapture income for depreciation that they never received."—Matt Hamilton (15:34)

7. The Need for Strong Accounting and Recordkeeping (16:06–16:58)

• Bookkeeping Matters:
  Accurate records are essential for tracking contributions, distributions, and allocations—particularly important given legal and fiduciary responsibilities when managing other people's money.

Notable Quote:

"The more capital you raise, the higher the risk of lawsuits and litigations if things go wrong... it's really important that you have that accurate record keeping."—Matt Hamilton (16:51)

8. What to Look For in a CPA (17:37–19:01)

• Go Beyond the Return:
  A good CPA will challenge you on allocations and structure; red flag if they instantly agree to creative allocations without question.
• Understand Deal Economics:
  The CPA must grasp both the economics and tax implications to design defensible strategies.
• Reputation Risk:
  Poor CPA work can damage your standing with investors if returns are amended or audited.

Notable Quotes:

"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..."—Matt Hamilton (17:46)

"You want to make sure that you have someone that understands it... they're there to help protect you both from yourself sometimes and from the IRS."—Nathan Sessa (20:31)

9. Common Syndicator Mistakes & Risks (20:31–24:47)

• Myths:
  • You can't just allocate depreciation however you want, even if you guarantee debt.
  • Partnership audits are rare but can be impactful; states often audit as well and can be stricter.
• The Human Side:
  Your reputation as a syndicator hinges on clear, consistent, and defensible processes.

Notable Quotes:

"One bad deal, one oversight can sink your ship quickly and it can be very difficult to recover."—Host (21:38)

"Reputation is...probably your most valuable asset in all honesty."—Nathan Sessa (23:30)

10. Introduction to the Major League Real Estate Podcast (24:47–27:46)

• Content:
  Interviews with fund managers, lessons learned, mistakes, actionable tax advice, and perspectives from CRE brokers, insurance, etc.
• Target Audience:
  Syndicators, fund managers, aspiring syndicators, tax professionals, and anyone wanting to understand partnership taxation better.

Notable Quotes:

"Our goal is to have the fund manager walking away with enough of an idea...so they can ask their CPA about it and make sure that they're in good hands."—Matt Hamilton (25:57)

11. Final Words & Who Should Listen (27:46–29:08)

• No Such Thing as "Too Small":
  Syndication and fund rules impact deals of all sizes; the complexity applies whether you're managing $500k or $500 million.
• Early Guidance is Best:
  Better to seek professional input sooner rather than later.

Notable Quotes:

"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...now apply to you."—Nathan Sessa (28:12)

“It's never too early to start looking into it.” —Matt Hamilton (28:50)

Memorable Moments & Quotes

• Matt Hamilton on CPA Red Flags:
  "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." (17:46)

• Nathan Sessa on Reputation:
  "Reputation is...probably your most valuable asset in all honesty, and you want to make sure you work with someone...that gives you the right answer to help you protect that." (23:30)

• Host Summing It Up:
  "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." (22:31)

Recommended Timestamps

• Intro & Context Setting: 00:32–02:20
• What is a Syndication? 04:24–06:00
• Funds vs. Syndicates: 06:09–08:26
• Common Tax Issues & Operating Agreements: 08:26–11:50
• Critical Role of K-1s: 11:50–12:34
• OA Pitfalls & Documentation: 12:34–13:21
• Fund Complexities: 14:07–16:06
• CPA Selection Criteria: 17:37–19:01
• Syndicator Mistakes & Human Element: 20:31–24:47
• Major League Real Estate Podcast Overview: 24:47–27:46
• Who Should Listen / Final Thoughts: 27:46–29:08

Tone & Language

The tone is practical, authoritative, and matter-of-fact—reflecting Hall CPA’s no-nonsense brand and the weight of the topics discussed. There’s a strong emphasis on actionable education, caution, and stewardship, using real-world language (e.g., "not sexy, but important" (16:51), "it’s never too early to start looking into it." (28:50)) and relatable metaphors ("sink your ship quickly" (21:38)). The conversation is approachable despite the technical subject matter and encourages listeners not to underestimate the importance of professional guidance.

Takeaways for Listeners Who Haven’t Heard the Episode

• Syndication and fund structures offer real estate investors pathways to scale but come with significant, often misunderstood, tax and compliance hurdles.
• The foundation of a solid syndicate or fund is a carefully constructed and CPA-reviewed operating agreement—never rely on templates or legal input alone.
• Timely and accurate K-1 reporting is just the beginning; investors and sponsors must ensure economic and tax realities match.
• Fund managers need CPAs who challenge and guide, not just “do the returns,” and reputation management is paramount.
• Complexity applies at all sizes of deals—the bar for diligence, advice, and documentation is high from the outset.
• The Major League Real Estate Podcast is a valuable education and community resource for aspiring and active syndicators/fund managers.