Real Estate & Partnership Tax

Real Estate Partnership Tax Services

Form 1065s, K-1s, waterfall allocations and deal planning for sponsors, syndicators, funds and investors.

Serving clients nationwide

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Illustrative distribution waterfallCash from a property flows through four tiers, return of capital, preferred return, GP catch-up and promote split, and is reported on each partner’s Schedule K-1.Distribution waterfallCash from operations, refinance or sale1Return of capitalBack to investors, pro rata2Preferred return8% pref, paid pro rata3GP catch-upSponsor catches up to target4Promote split70% LP, 30% GPSchedule K-1Partner’s shareIllustrative example

Every real estate deal runs on two sets of rules. Your operating agreement decides who gets cash and when, and the tax code decides who reports income, losses and gain. We build your partnership’s tax reporting around the deal itself, so what your investors receive and what their K-1s show tell the same story, from the day you close to the day you sell.

Partnerships of every shape, from one building to a fund

We work with sponsors raising outside capital, funds with layered structures, families holding property across generations, and investors coming in from overseas.

Sponsors & Syndicators

Multi-investor deals

GPs raising capital for multifamily, industrial, office, retail and mixed-use properties.

  • Promote and catch-up structures modeled before you close
  • Waterfall calculations for each distribution
  • Capital account statements investors can follow
  • K-1 delivery dates set at the start of the season
Funds & Tiered Structures

Real estate funds and fund-of-funds

Upper-tier and lower-tier partnerships where income passes through several layers before it reaches an investor.

  • K-1 coordination across upper and lower tiers
  • Feeder and blocker structures
  • Schedule K-2 and K-3 reporting
  • Section 704(c) and revaluation tracking
Family & Closely Held

Family real estate partnerships

Rental portfolios held in family LLCs and partnerships, often managed by one generation for the next.

  • Buyouts and ownership changes between family members
  • Section 754 step-ups after a death or a sale
  • Gifting and succession planning with your estate attorney
  • Passive loss and real estate professional reviews
Foreign Investors

Cross-border ownership of U.S. property

Partnerships with foreign partners, and families and companies abroad investing in U.S. real estate.

  • Section 1446 withholding and Forms 8804, 8805 and 8813
  • FIRPTA planning before you buy or sell
  • Withholding on transfers of partnership interests
  • Investment structure reviewed before the money moves

The partnership work behind every property

Filing on time is the baseline. Most of the value comes from getting allocations, depreciation and debt right early, because those decisions stay with the property until it sells.

Form 1065 and K-1s

Federal and state partnership returns and investor K-1s with tax basis capital, plus the supporting detail your investors’ own preparers need to file.

Waterfall and 704(b) allocations

We model the distribution waterfall in your operating agreement and run the allocations, including targeted capital accounts, so each partner’s capital tracks the economics of the deal.

Depreciation and cost segregation

Fixed asset schedules by property, cost segregation coordination, bonus depreciation decisions, and the Section 163(j) real property election, weighed against what it costs in depreciation.

Debt, basis and distributions

Section 752 liability allocations, refinance proceeds, and basis and at-risk limits, so partners know whether a distribution is taxable before the cash goes out.

Multi-state and local filings

State returns wherever your properties and partners are, nonresident withholding and composite filings, pass-through entity tax elections where they help, and city and local business taxes.

Accounting and investor reporting

Books kept by property, distribution calculations under your waterfall, and quarterly capital account statements for your investors.

Across the life of a deal

The tax decisions don’t wait for tax season

Most of what shows up on a K-1 was decided months earlier, at closing, at a refinance or when a new investor came in. We stay involved at each stage, so you know the tax effect before you commit.

  1. Formation

    Entity choice, the tax provisions of your operating agreement, contributed property under Section 704(c), and avoiding disguised sale treatment on early distributions.

  2. Acquisition

    Purchase price allocation between land, building and improvements, closing cost treatment, and whether a cost segregation study pays for itself.

  3. Operations

    Annual returns and K-1s, partner estimated taxes, passive loss planning and the qualified business income deduction.

  4. Refinance and recap

    Distributing refinance proceeds, admitting new investors, revaluing capital accounts, and partner buyouts with Section 754 step-ups.

  5. Sale or exchange

    1031 exchanges at the partnership level, drop-and-swap when partners want different outcomes, depreciation recapture, installment sales and the final return.

Fund-level partnership experience, sized for your deals

Our partnership tax experience comes from Big Four work on fund-of-funds structures, cross-border investments and purchase price allocations. The same issues show up in a growing real estate portfolio, at a different scale.

We start every engagement by reading your operating agreement. Once we understand how the deal is meant to work, the allocations, capital accounts and K-1s follow from it and stay consistent from one year to the next.

And because we’re involved year-round, planning happens before the refinance closes or the property goes under contract, while there’s still time to act on it.

What working with us looks like

  • A licensed CPA firm serving clients nationwide
  • Big Four partnership and fund tax experience
  • Your operating agreement reviewed before your first return
  • A K-1 delivery date agreed at the start of each season
  • Planning conversations before refinances, buyouts and sales
  • Scope and fees agreed in writing before work starts

From first call to first K-1

  1. Review the deal

    We read your operating agreement, closing statements, loan documents and prior returns to understand the economics.

  2. Build the model

    We set up capital accounts, the allocation model and depreciation schedules for each property, then maintain them every year.

  3. Prepare and deliver

    Returns are prepared, reviewed and delivered with K-1s on the agreed date, along with a summary you can share with investors.

  4. Plan ahead

    We stay involved through estimates, distributions, refinances and exits, so you know the tax effect before you decide.

Real estate partnership taxes, answered

What makes real estate partnership taxes different?
Most of the complexity comes from the deal terms. Preferred returns, promotes, debt allocations and property-level depreciation all change what each partner reports. The return has to reflect those terms every year, and early decisions, such as cost segregation or a Section 754 election, carry through to the sale.
When will our investors receive their K-1s?
Calendar-year partnership returns are due March 15, and an extension moves the deadline to September 15. Many real estate partnerships extend because they are waiting on lower-tier K-1s, a cost segregation study or year-end entries. We agree on a delivery date with you at the start of the season, so you can tell your investors when to expect their K-1s.
What is a Section 754 election, and when should we make one?
A Section 754 election lets the partnership adjust the tax basis of its property when an interest is sold or a partner dies, so the new owner’s share of depreciation and gain reflects the price they paid or the value at death. The election is made with a timely filed return, applies to all later transfers and distributions, and can only be revoked with IRS approval, so it’s worth modeling before you make it.
Can our partnership do a 1031 exchange if some partners want to cash out?
Often, yes, but it takes planning. The partnership is the taxpayer in the exchange, so partners who want cash and partners who want to defer gain need a structure that works for both. Common approaches include a drop-and-swap, where the partnership distributes tenancy-in-common interests before the sale, or a partial exchange where the cash portion is taxable. Each has its own risks and timing, so we model the options before the property goes under contract.
Is cost segregation worth it for our property?
It depends on the property’s cost, how long you plan to hold it, and whether your partners can use the deductions. A cost segregation study moves parts of a building into shorter depreciation lives, which front-loads deductions. Partners subject to the passive loss rules may not be able to use them right away, and part of the benefit comes back as recapture when you sell. We run the numbers for your partners before you order a study.
We have foreign investors. What does the partnership need to file?
A partnership with foreign partners generally has to withhold tax on their share of effectively connected income under Section 1446 and report it on Forms 8804, 8805 and 8813. Sales of U.S. real estate and transfers of partnership interests by foreign partners carry their own withholding rules, and the partnership may also need to prepare Schedules K-2 and K-3. We handle these filings and plan the withholding well before closing.
Do you work with partnerships in other states?
Yes. We work with sponsors, funds and investors across the country, including partnerships that own property in several states at once. Everything can be handled remotely, so your location doesn’t change how we work together. We prepare the nonresident and composite filings each state requires and look at pass-through entity tax elections where they benefit your partners.
Can you handle the accounting and investor reporting too?
Yes. We can keep the books by property, calculate each distribution under your waterfall, and prepare capital account statements and quarterly reports for your investors. With the accounting and tax work in one place, year-end goes faster and the numbers line up.

Bring us your next deal early

Request a free consultation. Share your operating agreement or term sheet, and we’ll walk through the tax side of the structure, the filings it will need, and what to settle before closing.

Request a Free Consultation