Background: We performed an annual financial statement review and preparation of partnership tax returns for the company and its ten plus subsidiaries. The client has had turnover in its accounting department; in addition, the employees on staff were inexperienced in GAAP accounting.

Problem/Objective: The client would consistently have significant real estate transactions requiring a fairly high level of technical expertise and significant time to prepare the accounting. The transactions ranged from acquisitions of existing operating real estate projects, sales of partial interests with varying sale dates, project rehabilitation and master lease arrangements. The client was short staffed and didn’t have the required bandwidth to prepare the accounting related to these transactions and their staff also lacked the technical expertise to account for their transactions under GAAP.

Solution: Perkins real estate team was able to provide support to the client, including sharing technical expertise and resources. The first issue we tackled with the client was an all hands meeting to determine a complete listing of transactions, then we established how much capacity their staff had to work on the transactions and finally a delegation of the transactions based on level of complexity and time involved. Several of the more complicated transactions were sent to us for preparation of the initial accounting and the client prepared initial accounting was sent to us for review to ensure it was in compliance with GAAP. The second issue related to the client’s turnover and relative inexperience with GAAP. Perkins regularly does training for its niche team members on various accounting and tax topics. These trainings are available to our clients’ staff to attend. Some past trainings with client attendance include: understanding and recording closing statements for real estate acquisitions and dispositions; lease accounting for GAAP and tax; and accounting for real estate transactions.

Background: Clients are syndicators of tenancy in common interests. The size of the real estate projects range from $2 to $20 million, with 2 to 14 co-tenants.

Problem/Objective: The client was looking for a cost effective and efficient way to provide operating information to the co-tenants requiring the least amount of work for each of the co-tenants and their tax accountants. In addition, the reporting prepared by the property manager while appropriate for proving information related to operations, was not appropriate for income tax reporting by an individual. These reports needed to be converted to a cash basis and allocated for each co-tenant’s ownership and related tenancy in common agreement.

Solution: The Perkins real estate team created a special set of supplemental schedules to include along with the project financial statements which provide each co-tenant with their respective share of operating revenues and expenses, fixed asset additions, and reconciliations from the income tax basis financial statements to the property manager financial statements.

Background: Client is a real estate investment group that has put together a fund, including equity, preferred equity, and mezzanine type lending deals. The fund includes all types of investors.

Problem/Objective: The Tax-exempt investors in the fund were being allocated unrelated business taxable income (UBTI) which creates tax for the normally tax-free investor. As new funds were created, the client wanted to find a way to include tax-exempt investors without passing on UBTI.

Solution: For the new funds, a real estate investment trust (REIT) was created that parallels each investment the fund makes and provides distributions to its tax exempt owners via dividends, which does not trigger UBTI or the related tax. The investment in the fund by the tax exempt entities is consistent with the investment by other types of entities except for the allocation of income and loss items.

Background: Client purchased an existing commercial building and did a complete asbestos removal project along with other significant tenant and building improvement projects.

Problem/Objective: The investment in the capital improvements described above was deducted over a fairly long period for tax purposes. Our goal was to maximize the depreciation expense allowed as much as possible.

Solution: Our real estate group worked with our affiliate, BDO Seidman, on a cost segregation study. The study analyzes the building, its structural components and other components and allocates the costs to the shortest-lived property allowed by the IRS. The cost segregation study allowed the client to take an additional $4.8 million in depreciation deductions in the year the study was done.