The tax impact for value-add apartment syndication is significant – and often favorable – to the passive investor. Because the passive investor in a syndication usually receives a profit from annual cash flow as well as the profit at sale, being a profit this money is taxable. However, the numerous tax benefits such as deduction in property taxes, loan interest, and depreciation offer significant tax advantages. In addition, accelerated depreciation via cost segregation and depreciation recapture confers even more tax benefits. Look out for your K-1 statement in March from your sponsor for the previous tax year. For a $100K investment, we often see an 8% preferred return combined with a paper loss on your annual K-1. Added to this we may have refinances or supplemental loans (which are a return of equity). When the property is sold, you may even be able to do a 1031 exchange into another property with the same sponsor and continue to defer your long-term gains tax.