St. Mary's Law Journal


The present trend of real estate investment is taking the form of utilizing the capital contribution of several persons rather than the former practice of an individual making such investments for his own account. These syndications, associations of several investors who combine their resources to acquire real estate property, allow for small investors to participate in real estate investment when they would not be able to otherwise. Syndications have available various legal forms, and it is essential that the syndication be structured in such a manner that it may achieved its desired goals. The ideal legal form for a syndication will: (1) provide the authority to borrow money for a portion of the acquired property’s purchase price; (2) eliminate an individual member’s liability for repayment of the borrowed money; (3) pass the taxable income, or loss, directly to the individual investor; (4) minimize the reporting requirements of the syndication itself to federal, state, or other regulatory agencies. Ultimately, the selected legal form must derive the maximum individual benefit to each investor. The most advantageous legal form for the purpose of real estate syndication is a limited partnership. This is because it is the only legal form which provides the utilization of debt equity leverage without resulting in either liability upon the limited partners or a tax imposed upon the debt. Because of this, limited partnerships will likely be utilized increasingly as the number of requirements for judicious real estate investment continue to increase in geometric progression. Therefore, the State of Texas practitioner is well advised to become familiar with the various statutory and tax aspects of this form of doing business in order to more capably serve his client.


St. Mary's University School of Law