The tax and financial quirks
- Tiered entities require K-1 reconciliation that most firms skip. An investor holding a 20 percent LP interest in a fund that owns a 50 percent LLC interest in a building holds a 10 percent look-through slice, and the K-1 reflects a two-tier chain of allocations. If any layer is off, every downstream K-1 is wrong. We reconcile every tier before releasing owner-level K-1s.
- 704(b) and tax-basis capital accounts are both required. The IRS requires tax-basis capital reporting. The operating agreement runs on 704(b) capital. A firm that maintains only tax-basis cannot answer the operating-agreement questions that actually matter when a partner takes a distribution, sells an interest, or dissolves. We maintain both books in parallel and reconcile annually.
- Cost segregation studies are the single largest deduction most real estate investors never claim. A $5M apartment building purchased without a study depreciates at roughly $128,000 per year over 27.5 years after a typical land allocation. With a cost segregation study identifying 5-year, 7-year, and 15-year property, and bonus depreciation restored to a permanent 100 percent for property acquired after January 19, 2025, the first-year deduction can reach well into six figures. The firm that never mentions cost seg is quietly underserving every real estate client.
- PTET elections require coordination across the stack. For tiered structures, an election at the operating LLC does nothing for income allocated to an upper-tier partnership; the upper tier generally has to make its own election. A partner with ten K-1s from ten different funds needs all ten PTET decisions reviewed annually for consistency. Most firms elect at the top tier and call it done.
- Section 754 elections are effectively permanent and consequential. When a partner buys or sells an interest, a 754 election allows the partnership to step up the inside basis of assets for the incoming partner. Once made, the election is revocable only with IRS consent, which is rarely granted. The wrong answer costs real depreciation over the holding period. We model the election before the transfer, not after.
- Depreciation recapture at sale is where bad planning shows up. Accelerated depreciation comes back at a 25 percent unrecaptured Section 1250 rate (or ordinary rates for non-real estate 5-year and 7-year property). A well-done cost seg can save $300,000 today and cost $180,000 at sale. The right planning accounts for the holding period, the 1031 exchange posture, and the likely disposition structure before the study is commissioned.
How we engage real estate investors
Most real estate investors start with tax strategy and preparation. From there, engagements deepen based on the complexity of the business: quarterly advisory for year-round strategy, embedded fractional CFO for multi-entity or growth-stage operations, entity restructuring when the business crosses natural thresholds. The engagement matches the need, not a template.
Where AI comes in
The highest-leverage AI use case for a real estate operator right now is compressing the time between receiving rent rolls, bank statements, and property manager reports, and producing partner-level investor reporting. What took a weekend of reconciliation can be cut to an afternoon, with the partner time reallocated to the interpretive work: flagging underperforming properties, modeling refinances, preparing quarterly investor calls.
We also see strong results using AI to support deal modeling, particularly the early screening of potential acquisitions against a standardized underwriting template.
Who this fits
Operators with three to fifty properties, typically multifamily, mixed-use, or light commercial. Syndicators with one or more actively managed funds and 20 to 200 LP investors. Family offices with real estate as a meaningful allocation. High-net-worth individuals with real estate partnerships generating multiple K-1s per year.
First engagement
A free consultation. We review your entity structure, your most recent K-1s, your depreciation schedules, and your operating agreements. If we are the right firm, we scope an onboarding that includes a 704(b) capital account reconstruction, a PTET posture review across entities, and a cost segregation candidate analysis for any recently acquired properties. From there, the monthly engagement begins.
The cost of bad real estate tax work is not visible until the sale, when it is too late to unwind. The cost of good real estate tax work is the monthly retainer. The math is not close.