What is a K-1?
The Schedule K-1 is a standard IRS form that is issued annually to report activity from investments in partnership interests. The K-1 will report to you your share of any taxable items for the calendar year for investments that you hold membership interest in.
If you are an investor in CrowdStreet Blended Portfolio I LLC (“CSBP”), you hold membership interest in an LLC (limited liability company) classified as a partnership. As such, the taxable activity earned by CSBP through real estate investments is allocated to all of the individual members (partners) in the Portfolio based on ownership percentage and is reported to the investors through the K-1. Your K-1 will be issued to you from the specific Series of CSBP that you are invested in.
To learn more about the real estate Schedule K-1 and if items such as depreciation will be included on the K-1, please visit the following articles in the CrowdStreet resource library:
How many K-1s will I receive?
An investor will receive a single federal Schedule K-1 for its investment in a Series of CSBP. Because each series of CSBP is treated as a separate partnership for tax purposes, an investor with holdings in more than one Series will receive a Federal Schedule K-1 for each Series. You should also expect to receive a state K-1 for each investment in a state where a state filing was necessary by the Portfolio.
Do I need to file out-of-state tax returns and why?
You may have an out-of-state filing requirement in states where investments are made. When a taxpayer owns an indirect interest in real estate through a partnership (including an LLC classified as a partnership for tax purposes), it may result in a state income tax filing obligation for such taxpayer in the state where the real estate is located (even for nonresidents). For investments held in states that do not assess income tax, or that have minimum filing requirements below your assessed income, out-of-state returns would not be filed. Also refer to the Q&A regarding “How many K-1s will I receive”. Please consult your tax advisor to determine what your state filing requirements are.
When will I receive my K-1s?
CSBP will deliver Schedule K-1s to investors as soon as it receives the underlying Schedule K-1s from investment vehicles. CrowdStreet will speed up the filing process by i) working with In commercial real estate, the sponsor is an individual or company in charge of finding, acquiring and managing the real estate property on behalf of the partnership. The sponsor is usually expected to invest anywhere from 5-20% of the total required equity capital. They are then responsible for raising the remaining funds and acquiring and managing the investment property’s day-to-day... More to underscore the importance of timely Schedule K-1 delivery and ii) working with CSBP I’s tax accountant to process the underlying Schedule K-1s as they are received. Investors will receive K-1 packages from CSBP I after April 15th and should be prepared to file extensions.
Will CSBP be filing state composite returns on my behalf?
CSBP will not be filing state composite returns. The nature of acquiring the necessary affidavit and filing composite returns is complex and costly. Additionally, with CSBP choosing not to file composite returns, the investor may avoid paying higher taxes than required. Investors that participate in composite returns may be subject to the highest marginal rates on the applicable income, and not be able to take advantage of lower graduated rates. Also, investors may not be able to take advantage of deductions, losses, or credits that they would be able to use if they were to file independently. You should consult your tax advisor regarding your particular circumstances.
Will I still receive a K-1 even if I haven’t received a distribution yet and there is no income to report from the underlying real estate investment?
You should still expect to receive a K-1 from your investment in CSBP as it will report to you your share of interest income and portfolio and organizational expenses related to CSBP.
Other Filings: 990-T
When an IRA (and SD-IRA) invests in alternative investments, such as a real estate investment, they may be required to file a 990-T Exempt Organization Business Income Tax Return when the investment generates UBTI (unrelated business taxable income). These returns are compiled at the IRA account level, not at the underlying investment level. If it is necessary for an IRA to file a 990-T, it will generally be prepared by the IRA Custodian, based on the aggregate amounts reported on the K-1s provided by all investment vehicles. For Self-Directed IRAs, the investor or their tax accountant would prepare the form. If you have invested in a marketplace deal via an IRA account, please consult your IRA Custodian or tax advisor to determine what your 990-T filing requirements are.
For more details regarding investing through an IRA account and UBTI, please visit the following articles in the CrowdStreet resource library:
CROWDSTREET, INC. AND ITS AFFILIATES DO NOT PROVIDE TAX, LEGAL, OR ACCOUNTING ADVICE. THIS MATERIAL HAS BEEN PREPARED FOR INFORMATIONAL PURPOSES ONLY, AND IS NOT INTENDED TO PROVIDE, AND SHOULD NOT BE RELIED ON FOR, TAX, LEGAL, OR ACCOUNTING ADVICE. YOU SHOULD CONSULT YOUR OWN TAX, LEGAL, AND ACCOUNTING ADVISORS FOR ADVICE REGARDING AN INVESTMENT AS IT RELATES TO YOUR PARTICULAR TAX CONSIDERATIONS.