IPED 101 – TAX CREDIT BASICS
CAPITAL ACCOUNTS
704(b)
&
MINIMUM GAIN
IPED 101 – TAX CREDIT BASICS
CAPITAL ACCOUNTS
• Increases to partner’s capital accounts
– Cash contributed
– Fair market value of property contributed
• Net of liabilities assumed by partnership
– Allocations of income or gain
• Decreases to partner’s capital accounts
– Cash distributed
– Fair market value of property distributed
• Net of liabilities assumed by partnership
– Allocations of loss or deduction, most credits
IPED 101 – TAX CREDIT BASICS
Partnership
Agreement
Developer
TAX
CREDIT
S
Investor
Limited Partnership
Capital
Account
IPED 101 – TAX CREDIT BASICS
Developer
Investor
Limited Partnership
Capital
Account
IPED 101 – TAX CREDIT BASICS
704(b) Issues
Developer
Cannot use credits or
losses
Must pay an adjuster to
the Investor
Investor
Limited Partnership
Does not receive
credits or losses
Capital
Account
704(b)!!!
IPED 101 – TAX CREDIT BASICS
Minimum Gain
• What is it?
– Assumed sale of asset at year end
– Assumed sale price of non-recourse debt plus $1
– Gain is calculated
• Assumed Sale price less Net Book Value
• How does it help a 704(b) problem?
– Assumed Minimum Gain is allocated to partners
– Losses can continue to flow to partners with negative capital
accounts
– Credits flow to the investor partner
LIMITED PARTNER
704(b)BASICS
REALLOCATION
IPED 101 – IRC
TAX CREDIT
BOSTON VILLAGE APARTMENTS, LP
SUPPLEMENTAL SCHEDULE OF FORECASTED LIMITED PARTNER CAPITAL
Print 15Yr
2004
2005
2006
2007
2008
CAPITAL ACCOUNT ACTIVITY - LIMITED PARTNER
Capital Account Activity
Beginning Capital Account
Contributed Capital
Historic Tax Credits
Cash Distributions
Passive Income (Loss)
$
2009
2010
2011
2012
2013
2014
2015
2016
No Issues with Construction Cost Overuns
- $
4,604,710
(8)
-
4,604,702 $ 4,490,200 $ 3,974,424 $ 3,466,092 $ 2,971,650 $ 2,496,417 $ 2,034,500 $ 1,586,220 $ 1,151,969 $ 964,655 $ 964,655 $ 964,655
242,354
(356,856)
(515,776)
(508,332)
(494,442)
(475,233)
(461,917)
(448,280)
(434,251)
(187,314)
-
4,604,702
4,490,200
3,974,424
3,466,092
2,971,650
2,496,417
2,034,500
1,586,220
1,151,969
964,655
964,655
964,655
964,655
Gain (Loss) from Sale in Yr 16
-
-
-
-
-
-
-
-
-
-
-
-
-
Liquidation of Capital Account
-
-
-
-
-
-
-
-
-
-
-
-
-
Capital Account
ENDING CAPITAL ACCOUNT
$ 4,604,702 $
Annual Credits to LP
Annual Credits to GP
4,490,200 $ 3,974,424 $ 3,466,092 $ 2,971,650 $ 2,496,417 $ 2,034,500 $ 1,586,220 $ 1,151,969 $ 964,655 $ 964,655 $ 964,655 $ 964,655
370,163
3,739
602,120
6,082
602,120
6,082
CAPITAL ACCOUNT ACTIVITY - LIMITED PARTNER
Beginning Positive Capital Account
Contributed Capital
Passive Income (Loss)
ENDING CAPITAL ACCOUNT
Annual Credits to LP
Annual Credits to GP
$
- $
4,525,000
(8)
-
$ 4,524,992 $
-
602,120
6,082
602,120
6,082
602,120
6,082
602,120
6,082
602,120
6,082
602,120
6,082
602,120
6,082
231,957
2,343
-
Issues with Construction Cost Overuns
4,524,992 $ 3,744,992 $ 3,044,992 $ 2,444,992 $ 1,950,550 $ 1,475,317 $ 1,013,400 $ 565,120 $ 130,869 $ (56,445) $ (56,445) $ (56,445)
(780,000)
(700,000)
(600,000)
(494,442)
(475,233)
(461,917)
(448,280)
(434,251)
(187,314)
3,744,992 $ 3,044,992 $ 2,444,992 $ 1,950,550 $ 1,475,317 $ 1,013,400 $ 565,120 $ 130,869 $
-
370,163
3,739
602,120
6,082
602,120
6,082
602,120
6,082
602,120
6,082
602,120
6,082
602,120
6,082
(56,445) $ (56,445) $ (56,445) $ (56,445)
333,393
274,809
608,202
608,202
234,300
IPED 101 Questions???
– TAX CREDIT BASICS
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