How Real Estate Developers Legally Pay Zero Taxes: CPA Explains K-1s, K-2s, K-3s & Structures

Most conversations about real estate tax strategy barely scratch the surface.
That’s why Eugene Gershman invited James onto the EG Real Estate Developer Podcast, where this episode originally aired, to break down the deeper mechanics of entity structures, developer tax incentives, K-1/K-2/K-3 reporting, and modular development at scale.

🎥 Original Episode on EG Real Estate Developer:
   • Building Smarter: Tax-Saving Secrets and t...  
‪@EG_Developer‬

This conversation goes far beyond typical CPA advice and reveals how professional operators actually structure their businesses for tax efficiency, compliance, and long-term wealth creation.

WHAT YOU’LL LEARN IN THIS EPISODE
1. Why Developers Pay Almost Zero Taxes (Legally)
• The economic reason the U.S. pushes tax incentives to builders
• How depreciation actually shelters income
• How qualified non-recourse debt boosts basis and creates tax-free cash-out events

2. K-1s vs K-2s vs K-3s, Why Compliance Just Got 10× Harder
• What K-2s and K-3s reveal about investor allocations
• Why global tax regimes are driving new reporting requirements
• How international investors impact U.S. tax compliance

3. The Partnership Tax World Explained
• LP vs LLC vs S-Corp vs C-Corp (and why C-Corps almost never belong in real estate)
• How to structure your management company, fund entity, and developer entity
• Why entity stacking is one of the biggest tax levers for real estate funds

4. Cost Segregation for Developers
• How cost seg changes when building from scratch
• Why developers rarely need a cost seg provider
• Bonus depreciation strategies for 2024 and beyond

5. Active vs Passive Income (Most CPAs Explain This Wrong)
• Why “passive income” from stocks isn’t passive for tax purposes
• How Real Estate Professional Status (REPS) unlocks massive tax power
• How to legally convert passive losses into active losses

6. Modular Multifamily: Speed, Cost, Financing & Risk
• Building 205 modular units in Denver
• Why modular saves time (and turbocharges IRR)
• Why most GCs are NOT modular-ready
• Inside the QC process: flying GCs and subs to the factory
• PACE financing explained, and when to use it

7. How to Raise a Real Estate Fund the Right Way
• Why funds fail without a back-office backbone
• What institutional capital expects (NAV, REO schedules, quarterly packages)
• Why most syndicators fail investor reporting tests
• How to structure your first fund like a professional family office

WHO THIS EPISODE IS FOR
• This episode is a MUST-watch if you operate in:
• Real estate private equity
• Syndications / Funds of Funds
• Family offices
• White-glove tax advisory
• Boutique development firms
• LPs investing with operators who may not have clean books

If you care about institutional-quality accounting, elite tax planning, and long-term wealth creation, this is for you.

📞 Book a Tax Strategy Call with James
https://calendly.com/jamesbohan/book-...

📨 Connect With James
LinkedIn: James Bohan, CPA, MRED
Instagram: @jamesbohancfo
Website: stonehan.com

⏱️ TIMESTAMPS
00:00 – Intro: Why developers legally pay zero taxes
01:30 – How depreciation & debt basis create tax-free cash flow
04:22 – K-1 vs K-2 vs K-3: Why tax reporting changed forever
08:50 – The nightmare of DIY real estate taxes
12:10 – Partnership structures: LPs, LLCs & entity stacking
15:32 – Cost segregation for developers vs buyers
18:45 – Active vs passive income (what CPAs don’t explain well)
23:58 – Real Estate Professional Status (REPS) explained
27:12 – Boutique hotels, AI check-ins & covered land plays
32:05 – The modular development model: time savings, risk & financing
39:44 – Navigating PACE financing & lender pushback
44:31 – Fundraising: how to structure a professional fund
47:50 – Why most syndicators fail: back office problems
50:20 – What investors actually need for their REO schedules
53:10 – How to work with James Bohan, CPA