Tax Efficiency In The DLP Housing Fund

Now I just got my K1 for the housing fund for 2023 again, the ordinary business income zippo again. This year I got $21,000 in distributions. None of it's taxable. Well, I guess about 1200 of it was taxable interest. But what could change in the future that would make the housing fund less tax efficient?

So the answer your question is so far to best of my knowledge, in the housing fund all investors have not had any taxable income while they've been invested. We've been able to shelter all of the income from tax through largely through depreciation. So what could happen that would make it less tax efficient over time? So there's two things that could lead two practical things that could lead to taxable income in the housing fund. One is if we generate incredible returns that we can't shelter from depreciation. So that's a really good problem to have. Now a couple years ago we generated a 45% return to investors in a single year in 2021. And we still were able to shelter all the income but depending on how many sales we have in a year and we could get to a point where we can't shelter all of it, that'll likely be from good reason, meaning returns are so high that we couldn't shelter all of it. The second factor is the fund is incredibly tax efficient for you as investor when you're invested as we're able to defer tax or depreciation. And there's some other great benefits in the fund being an evergreen fund as we sell assets, which we do over time, we can actually do like kind 1031 exchanges within the fund deferring out long term gains. A lot of unique things we can do to make it really, really tax efficient. But when you exit the fund, that's when you'll have some generally some long term capital gains when you exit your position. But the nice thing with the fund being evergreen is you can stay in as long as you want. You could choose to exit the fund when it's the right time for you to have a taxable event, but also once you do so, you were able to have the gain in your account over however many years you were in the fund, tax deferred, which makes a huge difference. And then when you are taxed it's gonna likely be. None of us know if tax code could change in the future, but as of today you'd be being taxed at long term capital gains, which has historically been at a much lower tax bracket than our most of our ordinary income tax bracket.

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