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Tax Considerations and Frequently Asked Questions for Original Partnerships & Original Investments Included in The WWC Recapitalization Portfolio.
| Disclaimer: The following is intended to help provide potential investors with summary information that may typically be considered pertaining to investments with Western Wealth Capital and is not to be used as legal or tax advice. Neither Western Wealth Capital nor its subsidiaries, related entities, directors, officers, employees or consultants are qualified to provide tax or legal advice to prospective investors. It is important that investors contact their own legal and tax advisors for advice specific to their own situation and determine the potential legal and tax implications pertaining to their investments with Western Wealth Capital or any of its affiliated entities. |
Background on Properties Included in The WWC Recapitalization Portfolio
The original limited partnerships that owned each property have transferred the deeds of the respective properties to the new limited partnerships that now own each of the properties. The transfers were done as tax-free rollovers.
The original partnerships will remain active in the original structure and continue annual tax filings until the property is sold. A key objective of this transaction is to recover as much value as possible and to provide future returns to investors that originally invested in these properties. To do so, it is necessary to keep the old partnerships active so that any potential future distributions may be made.
Q: Will the partnerships continue filing taxes?
A: Yes. As the partnerships are still active, they are required to continue filing taxes annually.
Q: Will original investors continue filing taxes pertaining to the partnerships and properties?
A: Yes. Partners will continue to receive annual K-1 slips as normal until the property is sold and the affairs of the relevant partnerships have been concluded and wound-up. Partners will continue with the same capital account balances as before – they will not see a change on their K-1s.
Q: Is it expected that original partners will have taxable income from these properties between now and a future sale?
A: Technically; yes, however practically; no. Original partners’ share of income from the properties will be significantly reduced because the new basis for tax purposes combined with the dilutive effect of the new venture ownership allocations (which will be substantially all of the new value) will mean that partners will have practically zero income to report in future years. For the period from January 1, 2024, to the date the U.S. real property was transferred to the new partnership (September 27th for nine of the properties, October 7th for Asteria, and date to be determined for Keystone Falls) the limited partners will be allocated tax losses in a manner like prior years. However, taxable income will be recognized by the original partners upon the sale of the real property to recapture previously taken depreciation, which remains with the original partners who have claimed it over the years.
Q: Will original investment partners be able to recognize additional losses for tax purposes as a result of this transaction?
A. There are no new losses. The transaction is expected to qualify as a tax-free contribution and thus should not trigger gains or losses for U.S. tax purposes. Previously taken bonus depreciation will have used most/all of the losses. Any recapture would not be recognized until the future sale.
Q: Have there been any changes to the distribution sequence from the original partnerships as a result of this transaction?
A: No there has been no change to the partnerships that you have invested in. Distributions would be made in accordance with the partnership agreements for each original partnership. Generally, distributions would be return of capital until any distributions that exceed the original capital contribution would be considered ‘profit’.