Answers/Funds
Tax and money questions real estate funds and syndicators ask
Straight answers with the forms, thresholds, and deadlines that actually apply. Every page starts with the short answer and ends with what to do about it.
Answered so far
8
questions for real estate funds and syndicators
Income
Are fund management fees taxed as ordinary income?
Yes. Management fees a sponsor collects from a fund are ordinary income, taxed at regular rates in the year earned and generally subject to self-employment tax. They never qualify for capital gains treatment; only the promote, as a profits interest, can capture the fund's capital gain character.
Do real estate fund managers pay self-employment tax?
Yes, on their service income. Management fees, acquisition fees, and guaranteed payments a fund manager earns are subject to the 15.3% self-employment tax. Promote allocations structured as a profits interest, and passive rental income allocated to invested capital, generally are not.
Are acquisition fees taxable income?
Yes. Acquisition fees a sponsor charges the fund at closing are ordinary income to the GP entity, taxable in the year earned and generally subject to self-employment tax. Unlike the promote, they get no capital gains treatment. The fund typically capitalizes the fee into the property's basis.
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