Ask TaxMama.Com Tax Information With A Mother's Touch Published by Eva Rosenberg, MBA, EA Volume 6, Issue 245        February 6, 2004

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Tax Credit Mutual Funds » From: The Internet Dear TaxMama: Read your column in CBS Marketwatch on tax Credits Any opinion of tax credit "funds?" Like those offered by Boston Capital, the only one I could find that sells the tax credits to New York residents? See this URL for Boston Capital Philip Hi Philip, I don't have a strong opinion because I don't know that much about them. Though I do have a client invested in one or two of Boston Capital's credit funds. So I know a little bit. As I understand them, these funds, essentially, invest in real estate that qualifies for the rehabilitation credits. Shareholders are issued K-1s, with their share of deductions and credits on these properties. At some point, the properties are fixed up and rented. The deductions and credits continue. Then, surely, as any real estate investment, it should start earning a positive cash flow and distribute money to investors. And someday, it will be sold. I haven't seen either or those happen yet. Looking over their website, they don't talk about what happens when the properties are sold and your basis (tax cost) of your investment is below -0-. Do they never intend to sell these properties? Do they plan to simply run them into the ground? Are the tax credits the only return you get on your investment? However, I have seen some recapture of credits appearing on some of his K-1s. On a tax note: When your income is too high to qualify for any deductions from real estate losses, you may still use the credits On an investment note: Sensible real estate investments include buying a property, fixing it up, increasing its value and the net cash flow from higher rents. Then either living well off the cash flow, as expenses and mortgage decline, or selling the property and getting a profit that way. I don't see these credit trusts sending out distributions. Do they? Anyway, those are just my observations. (I spent most of the '70s and '80s working with many real estate partnerships and development companies - training property managers, collecting the rents, dealing with evictions, doing all the tax returns, making out lots of distribution checks to happy investors...even handling the bankruptcies of partnerships that were over-extended. And meeting IRS on the few audits they initiated. So, I know a little bit about real estate in general.) Best wishes, Eva Rosenberg Your TaxMama

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