The Overlap of Tax and Financial Aspects of Real Estate Ventures
Journal of Real Estate Taxation, Vol. 39, p. 67, 1st Quarter 2012
30 Pages Posted: 15 Apr 2012 Last revised: 20 Jun 2012
Date Written: April 15, 2012
This article examines the effect partnership tax law has on financial aspects of real estate ventures. It introduces the relevance of the aggregate and entity views of tax partnerships (i.e., LLCs, LPs, and other partnerships) and demonstrates how those views can greatly affect financial projections for each of the members of a real estate venture. It also demonstrates how financial calculations can vary significantly depending upon how closely analysts track a tax partnership’s allocation method. Finally, the article serves as a primer for tax practitioners who are unfamiliar with the financial tools that are so prevalent in real estate analysis, and it illustrates the use of tools that are critical in valuing interests in tax partnerships.
Keywords: tax partnership, net present value, internal rate of return, cash flow projections, aggregate versus entity, valuation of tax partership interests
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