Odd Investment Ending -- Yippee!

[PaunchyPirate]

Way back in 2004, when I was an Ameriprise customer , I was talked into an $18,000 investment in a Low Income Housing Tax Credit Fund. The fund is now managed by Boston Financial (they took it over from the original management company a few years ago). I wasn't lied to by Ameriprise. I understood that this was a 15+ year investment that might not return profit at the end of its life, but rather would give me a yearly tax credit that I could deduct on my taxes every year. But I think I was expecting more obvious tax benefits than I actually realized through the years. I also didn't factor in the yearly tax headache of the K-1.

After several years of waiting on K-1 forms from the investment (usually until late March or early April) and not really seeing it benefit me much on my tax returns, I grew very tired of this investment. However, there was no real way to get out of it short of trying to find some company to buy it on the secondary markets (which I found confusing to deal with). I have no idea if I got $18k of money back on my taxes over the years. I grew to not really care. I just wanted it to go away.

Today, I finally got a letter from the managing company that this investment will wind down on December 31st of this year and my final K-1 will be mailed in March. I'm beyond thrilled. I have no idea how a "final K-1" will impact my taxes this year and I have no idea if I get any of my $18k back (nothing was mentioned about it in the letter, so I'm guessing not). I'm just happy to end it so I can file my relatively simple taxes in February like most people.

Thinking back, I think it was a post about this investment years ago that got me started here on ER.org. I found a post by someone in the same investment and we commiserated together about how annoying it was.

I'm a happy camper this morning.

 

[Sunset]

Surely the K-1 document tells you something about the value of your "investment" each year.

 

[PaunchyPirate]

Surely the K-1 document tells you something about the value of your "investment" each year.

Of course it does. However, due to various factors on the IRS tax forms related to overall income (which changed a lot over the years, phased qualifications, etc.), it was not always obvious how much I "benefited" each year on my taxes. Honestly, I stopped trying to measure this over 10 years ago.

Some cold day this winter, I will probably pull out my tax returns and see if I can gather some feel for how successful this investment was.

 

[SecondCor521]

I would expect your final K-1 to have more numbers on it, which may possibly be confusing and unclear how to enter them on your individual 1040. @cathy63 would probably know more than me.

It'll be nice to be out of the K-1 business.

 

[PaunchyPirate]

I would expect your final K-1 to have more numbers on it, which may possibly be confusing and unclear how to enter them on your individual 1040. @cathy63 would probably know more than me.

It'll be nice to be out of the K-1 business.

Yea, that's what I've read elsewhere and am expecting. To date, I've been able to use TurboTax and it has dealt with the numbers on the K-1. Hopefully, it will still handle it for the final one. I know it always asks me if this is a "final" K-1, so this year I'll get to say YES and see what happens.

 

[Sunset]

Hopefully they send you some money too !!

Unless they send a check, I think you will have to contact them, as it's possible they could put any money you are due into an account managed by them for your benefit, or send to some old account you had long ago.

This is a good lesson that investing for a tax deduction could mean it's a bad investment.

 

[enjoyinglife102]

I personally would not go back and try to analyze how it all worked out since it will do nothing for you in the future. There is nothing to be learned so why bother spending the time and digging out old tax returns? All it can possibly do is make you regret it even more. Like a lot of things in life, the past should just stay in the past and it's better to put your energy and focus on things going forward that will bring you happiness.

 

[PaunchyPirate]

I personally would not go back and try to analyze how it all worked out since it will do nothing for you in the future. There is nothing to be learned so why bother spending the time and digging out old tax returns? All it can possibly do is make you regret it even more. Like a lot of things in life, the past should just stay in the past and it's better to put your energy and focus on things going forward that will bring you happiness.

You know, this is very true. I may just take your advice. Unless I need to calculate something for the final tax return, I may just move on.

 

[mrfeh]

I would expect your final K-1 to have more numbers on it, which may possibly be confusing and unclear how to enter them on your individual 1040.

+1

I was a member of an LLC from '09 to '21. While I never completely understood the K-1, I was able to deal with taxes myself (using Turbo Tax).

But not the final K-1. I had to go to a tax pro.

 

[ncbill]

Yep, I've got a now decade-old investment that stopped paying anything years ago.

I'd love to be able to take the capital loss but have to wait until it formally closes down.

 

[Stormy Kromer]

I invested in something similar many years ago. The late arriving k-1 was a pain. I never did the math but I'm sure I would have been ahead to have invested in an index fund and paid the taxes each year.

It was a lesson. Never buy an investment only for the tax benefit.

 

[Koolau]

I invested in something similar many years ago. The late arriving k-1 was a pain. I never did the math but I'm sure I would have been ahead to have invested in an index fund and paid the taxes each year.

It was a lesson. Never buy an investment only for the tax benefit.

I got "sold" some investments and what I learned was: Never invest in something you don't completely understand!

 

[Koolau]

I got "sold" some investments and what I learned was: Never invest in something you don't completely understand!

Oh, and don't trust anyone - not even a "friend" who is now a "Financial Advisor." YMMV

 

[ncbill]

I got "sold" some investments and what I learned was: Never invest in something you don't completely understand!

Yep, I got sold non-traded investments.

One trick they use is offering higher-than-normal (versus publicly traded) yields which start dropping once the investment closes.

E.g., I had one that started off paying 8%, then after 6 months dropped to 6% then in another 6 months down to 4%, finally stabilizing at 2%.

And they also restrict redemption...others that originally promised quarterly redemptions switched to only on death or permanent disability.

Also don't forget the person selling them gets paid a hefty commission, often up to 10%.

Finally got rid of all of them at a loss...I joke I may never have to pay taxes on long-term capital gains ever again.

 

[Koolau]

Yep, I got sold non-traded investments.

One trick they use is offering higher-than-normal (versus publicly traded) yields which start dropping once the investment closes.

E.g., I had one that started off paying 8%, then after 6 months dropped to 6% then in another 6 months down to 4%, finally stabilizing at 2%.

And they also restrict redemption...others that originally promised quarterly redemptions switched to only on death or permanent disability.

Also don't forget the person selling them gets paid a hefty commission, often up to 10%.

Finally got rid of all of them at a loss...I joke I may never have to pay taxes on long-term capital gains ever again.

Heh, heh, I actually got sold a total fraud (not as sophisticated as Madoff - but just as much a fraud when all was said and done.) Never got back a dime. Once burned - twice shy.