Comprehensive deal-modeling environment for sophisticated practitioners. Configure deal type, capital stack, debt, distribution waterfall, governance, and state tax treatment; output investor IRR / MOIC / DPI / TVPI, sponsor promote, sensitivity, and a deal summary suitable for term-sheet circulation. All output is mechanical computation based on inputs and assumptions documented on this page. No part of this tool constitutes legal, tax, or accounting advice; engagement of the firm for review of any structure modeled here is required before reliance.
Step 1 — Deal Structure
Starter Scenarios
Select a representative deal structure to pre-populate the tool with realistic starting values. The values are common industry defaults; revise every field for your specific deal before generating documents.
Select the deal type. The tool adapts capital-stack defaults, governance options, debt treatment, and warnings based on the structure selected. Phase I models the economics of every structure. Phase IV will add the deep compliance engines (REIT income/asset/distribution tests, OZ 90% / 70% tests, TIC Rev. Proc. 2002-22 conditions, DST Rev. Rul. 2004-86 seven deadly sins).
Operating LLC — single-asset: Most common structure for a single-property real estate venture. Limited liability, flexible governance, pass-through taxation by default. No special compliance regime beyond §704(b) allocation rules. Best for sponsor + small group of LPs holding a single building or development.
Florida: Default for FL-resident principals and FL property. No state income tax. Annual report due May 1. Single-member LLC charging-order protection weakened post-Olmstead v. FTC, 44 So.3d 76 (Fla. 2010).
Used in headings, outputs, and saved deal files. Not legally binding.
Property location drives state apportionment and FIRPTA analysis (Phase III).
Governance
Manager-Managed concentrates authority in a designated manager (typical sponsor structure). Board adds a layer of committee governance. Sponsor as GP applies where the entity is an LP rather than an LLC.
Transfer & Exit Provisions
Step 2 — Capital Stack
Define member classes, capital contributions, and debt. The tool supports unlimited member classes with independent preferred return, profit share, loss share, voting rights, and transfer restrictions. Member debt is classified by §752 treatment: recourse, nonrecourse, or qualified nonrecourse financing under §465(b)(6).
Member Classes
Total Member Capital
$0
Number of Classes
0
Senior Construction / Acquisition Debt
Principal amount of the senior debt facility.
Approximates the construction draw curve. 75% is typical for an 18-month build.
Nonrecourse: Allocated to members in accordance with their share of partnership profits under the third tier of Reg §1.752-3(a)(3). Does not increase basis for at-risk purposes under §465.
Member Debt / Mezzanine
Total Senior Debt
$0
Total Member Debt
$0
Total Debt
$0
Total Capital Stack
$0
LTC %
0%
Equity %
0%
Step 3 — Project Budget
Build the project budget. Total project cost should reconcile to total capital stack. Variances indicate either an over- or under-funded position that may require capital calls or distribution of excess.
Acquisition & Development
For acquisition-and-renovate deals; leave at $0 for ground-up.
Materials, labor, subcontractor work. Include contingency line below separately if you want to track.
Recommend 5–10% of hard costs on CM-Agency structures (vs. 3–5% on GMP).
Computed below if you set debt rate and hold period in earlier steps. Override if you have a more precise estimate.
Project Timing & Exit
Anticipated gross sale price or stabilized value at exit.
Disposition Costs
FL doc stamps on deed are $0.70 per $100 (0.7%).
Total Project Cost
$0
Capital Stack
$0
Variance
$0
Variance detected. Capital stack and total project cost differ. Adjust capital contributions, debt, or budget line items to reconcile.
Step 4 — Distribution Waterfall
Configure how distributable cash flows to members. The engine supports American (deal-by-deal) and European (fund-level) waterfalls, multi-class preferred returns, tiered IRR or MOIC hurdles, catch-up provisions, and clawback. Each tier can use either IRR or MOIC as its trigger.
Waterfall Framework
Tier 1 — Preferred Return
Tier 2 — Return of Capital
Promote Tiers (Tier 3+)
Add as many promote tiers as needed. Each tier specifies an IRR or MOIC threshold and the split of distributions above the prior tier’s endpoint. A typical deal might use 80/20 to 15% IRR, 70/30 to 25% IRR, 60/40 above 25%.
Catch-Up Provision
Catch-up runs after the pref is paid and before normal promote tiers begin. Closes the gap between LP pref and sponsor's pro-rata share.
Clawback
Minimum IRR (or MOIC) that LPs must receive at exit; sponsor returns promote to make up any shortfall.
Sponsor Compensation (Fees, paid before waterfall)
Step 5 — State & Tax Overlays
State income tax and federal tax overlays applied at the partnership and member level. Phase II will add full §704(b) targeted vs. substantial-economic-effect allocations; Phase III will add blocker structures, FIRPTA, and tax-exempt UBTI; Phase VI will refine §163(j), §461(l), and §199A treatment. Phase I provides directional output based on top marginal rates.
Property State (for sourcing & apportionment)
Federal Tax Overlays
Member Tax Profile (assumed for IRR computation)
§ 163(j) — Interest Limitation Detail
§ 448(c) small business exception: if average annual gross receipts for the prior 3 taxable years are at or below $31M (2025; indexed), the partnership is exempt from § 163(j). Aggregation rules under § 448(c)(2) may bring related entities into the calculation.
Real property trades and businesses may elect out of § 163(j). Election is irrevocable. Consequence: residential rental property depreciated under ADS over 30 years (vs. 27.5 GDS); nonresidential over 40 years (vs. 39); qualified improvement property over 20 years (vs. 15). For high-leverage deals, the trade-off generally favors election out.
For tax years beginning after 12/31/2021, ATI is computed including depreciation and amortization (no longer EBITDA-equivalent). For most real estate deals during construction, ATI is small or negative.
If 0, the engine uses the computed senior interest carry from Step 3. Floor plan financing interest and small-business interest are excluded from the limitation.
§ 461(l) — Excess Business Loss Detail
§ 461(l) limits the deduction of business losses for non-corporate taxpayers. Excess losses are deferred to the following year as a § 172 net operating loss. The 2026 threshold (after inflation adjustment) is approximately $313,000 single / $626,000 MFJ. Excess business loss is computed by aggregating net trade or business income/loss; capital losses and wage income are excluded.
Other trade or business income from member’s other activities (active or passive). Aggregated with this deal’s allocation to determine excess.
Existing NOL carryforward from prior years. Subject to 80% of current-year taxable income limitation under § 172(a)(2) for losses arising in post-TCJA years.
Leave at 0 to use the engine default ($313K single / $626K MFJ for 2026). Provide explicit override if Congress has changed the threshold.
§ 199A — Qualified Business Income Deduction Detail
Rev. Proc. 2019-38: rental real estate qualifies if 250+ hours of rental services performed annually (lower threshold for properties placed in service in current year), separate books and records maintained, and contemporaneous records. Triple-net leases generally do NOT meet the safe harbor and require common-law analysis.
Above threshold, the deduction is limited by the greater of (i) 50% of W-2 wages paid by the partnership or (ii) 25% of W-2 wages plus 2.5% of UBIA of qualified property. SSTBs phased out entirely above the upper threshold (real estate is not an SSTB).
If property is operated through an independent property manager, W-2 wages at the partnership level may be minimal. Consider TRS-like structure or in-sourcing management to generate qualifying W-2 wages.
Unadjusted basis immediately after acquisition of qualified depreciable property. For a real estate deal, generally the building basis (excluding land). 2.5% of UBIA contributes to the wage/UBIA limit.
State Pass-Through Entity Tax (PTET) & Multi-State
A PTET election shifts state income tax from the member to the partnership, federally deductible (avoiding the $10,000 SALT cap). Available in most states with state income tax. Mechanics vary — some are mandatory once elected, some are annual elections, some have specific tax periods. The RESERVE member dossier should ensure proper documentation prior to election.
For deals operating in multiple states. Real estate income is generally sourced to the state of property location, but operating income from services, management fees, and similar may apportion under each state’s formula.
Nonresident members may trigger state withholding obligations on the partnership. Most states require withholding at the state top rate or a fixed nonresident rate.
Composite returns allow the partnership to file a single return on behalf of all nonresident members, simplifying compliance. Available in most states but with eligibility restrictions and rate implications.
Year-by-year detail tracks each member’s capital account and outside basis through each year of the hold period. Useful for documenting allocations through annual returns and for partnership audit defense.
Step 6 — Tax Allocations
Configure the partnership’s allocation methodology under § 704(b) and § 704(c). The engine runs all three § 704(c) methods (traditional, traditional with curative, remedial) in parallel for comparison. Capital account roll-forward is computed for each member class. Mandatory adjustments under § 743(b) for substantial built-in loss and § 734(b) for substantial built-in loss on distributions are flagged automatically.
§ 704(b) — Allocation Method
Targeted Capital Account Method: Modern default for real estate partnerships. Allocations are made to drive capital account balances to the amounts each partner would receive on a hypothetical liquidation following the partnership’s distribution waterfall. Implicitly satisfies the partner-by-partner economic effect test through the qualified income offset. Does not require a deficit restoration obligation. Reg. § 1.704-1(b)(2) safe harbor not formally claimed but allocations respected if economic effect is preserved.
Full maintenance tracks book and tax capital separately with revaluations under Reg. § 1.704-1(b)(2)(iv)(f). Required for SEE methods.
Required by Reg. § 1.704-2 when partnership has nonrecourse debt. Reverses prior nonrecourse deductions on debt paydown.
Deficit Restoration Obligation — By Member Class
Under SEE+DRO, partners with negative capital account balances at liquidation must restore the deficit. Typically only the sponsor or a guarantor partner agrees to a DRO. Select which classes have a DRO.
§ 704(c) — Built-In Gain or Loss on Contributed Property
§ 704(c) applies when contributed property has a book value different from its tax basis. The contributing partner generally bears the tax burden of pre-contribution appreciation. Common in roll-up transactions, UPREIT contributions under § 721, and family-owned property contributions.
§ 704(c) Layers
Each contribution event with a book/tax basis difference is a separate layer. The engine will run traditional, curative, and remedial methods in parallel for comparison.
§ 754 Election & Basis Adjustments
A § 754 election triggers basis adjustments under § 743(b) (transfers) and § 734(b) (distributions). Permanent unless revoked with Commissioner consent (Reg. § 1.754-1(c)). Note that § 743(b) is mandatory on transfers if there is a substantial built-in loss; § 734(b) is mandatory on distributions causing substantial built-in loss.
If yes, the engine will surface the § 743(b) adjustment a transferee would receive.
Special Allocations
Typical reclassification ranges 15–30% for residential and 20–40% for hospitality and industrial.
Specify the tax profile of each investor class and insert blocker entities where structural protection is needed. The engine analyzes FIRPTA exposure (USRPI determination, § 1445 withholding, § 1446(f) partnership-interest withholding, § 897(l) qualified foreign pension fund exemption, § 897(h)(1) domestically-controlled QIE exception), UBTI exposure for U.S. tax-exempts (§ 514 unrelated debt-financed income, § 514(c)(9) qualified organizations exception with the fractions rule), and the tax leakage of alternative blocker structures. Structural recommendations are generated from the resulting investor matrix.
Investor Tax Profiles — By Member Class
Blocker Entities
Insert blocker entities to interpose between specific investors and the main SPV. Common patterns: (1) domestic C-corp blocker for U.S. tax-exempt investors to convert UBTI into corporate-level income; (2) foreign corporation blocker (Cayman, BVI, Bermuda) for foreign investors to avoid ECI filing obligations; (3) REIT blocker for mixed pools, addressing both UBTI and certain FIRPTA exposures; (4) treaty blocker (Netherlands, Luxembourg, Ireland) to reduce withholding on distributions to qualifying foreign holders subject to LOB; (5) double-blocker stacking foreign + domestic blockers for foreign investors in fund structures.
FIRPTA Configuration
USRPI under § 897(c) includes: (1) any interest in real property located in the U.S. or U.S. Virgin Islands, including improvements thereto; (2) interests in domestic corporations that are USRPHCs; and (3) certain partnership and trust interests where look-through applies.
Under § 897(c)(2), a domestic corporation is a USRPHC if 50% or more of the FMV of its real property and trade or business assets are USRPIs. The cleansing rule under § 897(c)(1)(B) requires that no USRPIs be held at the date of disposition AND that all USRPIs held during the prior 5 years be disposed of in fully-taxable transactions.
§ 897(h)(1): foreign person’s gain on disposition of stock in a domestically-controlled QIE is generally NOT treated as gain from a USRPI. Under TCJA-era guidance and post-2024 final regulations, the 50% test looks through certain entities (including foreign-owned domestic C-corps in some cases).
If 0, the engine uses the exit_price from Step 3. Used to compute § 1445 (15% of gross proceeds for direct USRPI sale) and § 1446(f) (10% of amount realized for partnership-interest transfer).
UBTI Configuration
§ 514(c) defines acquisition indebtedness broadly. Real estate construction and acquisition loans almost always qualify. UDFI is computed as: average acquisition indebtedness / average adjusted basis × net income from the property.
Estimate of the debt-to-basis ratio over the hold period. Used as the UDFI percentage for tax-exempt investors not protected by § 514(c)(9) or a blocker. Default 60% reflects typical levered RE.
Step 8 — Specialized Compliance
Compliance dashboards for structure-specific regimes. The applicable module is determined by the deal type selected in Step 1. REIT structures run the full battery under § 856 et seq. (100-shareholder rule, 5/50 closely-held test, 75% and 95% gross income tests, 75% asset test, TRS 20% limit, 5% securities and 10% voting/value rules, 90% distribution requirement). Opportunity Zone structures run the QOF 90% asset test and the QOZB 70% tangible property test with active-conduct, working-capital-safe-harbor, substantial improvement, original use, and sin-business analyses. TIC structures run Rev. Proc. 2002-22 conditions. DST structures run the Rev. Rul. 2004-86 seven deadly sins.
The deal type selected in Step 1 does not require specialized compliance modeling under this tab. If you change the deal type to a REIT, UPREIT, DownREIT, QOF, QOZB, TIC, or DST structure, the corresponding compliance module will appear here.
REIT Compliance — § 856 et seq.
§ 856(a)(5): a REIT must have at least 100 beneficial owners after its first taxable year. Use of demand-redemption / 100-shareholder accommodation preferred is common for private REITs to satisfy this requirement without diluting principal investors. Failure rules under § 856(g)(1)(B) provide cure procedures.
§ 856(h) closely-held test: during the last half of the taxable year, 5 or fewer individuals (applying § 544 attribution) may not own more than 50% of the value of stock. Private REITs typically structure with a "demand-redemption" preferred class to satisfy both this and the 100-shareholder rule.
Includes rents from real property (§ 856(d)), interest on obligations secured by real property mortgages, gain from sale of real property not held primarily for sale (§ 856(c)(3)(C) and (D)), refunds and abatements of real property taxes, income from foreclosure property, and commitment fees. The 75% test requires 75% from these sources; the 95% test requires 95% from these plus dividends, interest, gain on stock/securities, and qualified temporary investment income.
Other passive income that counts toward the 95% test but NOT the 75% test: dividends, interest other than mortgage interest, gain from sale of stock or securities.
§ 856(c)(4)(A): at least 75% of value of total assets must be real estate assets, cash, cash items, and government securities. Real estate assets include real property (incl. land, buildings, improvements, leaseholds of 30 years or more), shares in other REITs, and debt instruments issued by publicly offered REITs.
§ 856(c)(4)(B)(ii): securities of one or more Taxable REIT Subsidiaries (TRSs) may not exceed 20% of the value of the REIT’s total assets (reduced from 25% by TCJA, effective for taxable years beginning after 12/31/2017). TRSs hold non-qualifying business activities and operating tenant services.
§ 856(c)(4)(B)(iii)(I): not more than 5% of the value of REIT’s total assets may be securities of one issuer (with exclusions for real estate assets, government securities, and TRS securities, which are tested separately).
§ 857(a)(1)(A): must distribute at least 90% of REIT taxable income (excluding net capital gain) to avoid loss of REIT status. § 4981 imposes a 4% excise tax on undistributed amounts above thresholds; 100% distribution avoids both.
Opportunity Zone Compliance — § 1400Z-2
QOF — Qualified Opportunity Fund
§ 1400Z-2(d)(1): a QOF must hold at least 90% of its assets in QOZ property (direct QOZBP, partnership interests in QOZBs, or stock in QOZB corporations). Measured semi-annually at June 30 and December 31, averaged. § 1400Z-2(f) imposes a penalty for failure unless reasonable cause.
Form 8996 must be attached to the federal tax return for the first year of QOF status.
QOZB — Qualified Opportunity Zone Business
§ 1400Z-2(d)(3)(A)(i): "substantially all" of tangible property must be QOZ business property. Final regulations define "substantially all" as 70% for this purpose. Lower threshold than the 90% test applicable at the QOF level.
§ 1400Z-2(d)(3)(A)(ii): at least 50% of total gross income must be derived from the active conduct of a trade or business within the QOZ. Three safe harbors under final regs: tangible property and management hours in QOZ; tangible property + management compensation in QOZ; or facts-and-circumstances.
§ 1400Z-2(d)(3)(A)(v): cash held under a written plan with a schedule and intended use within 31 months for acquisition, construction, or substantial improvement of QOZBP is treated as a reasonable amount of working capital and as held in QOZ. Extended to 62 months for governmental delay.
§ 1400Z-2(d)(2)(D)(ii): if QOZBP is not "original use," it must be substantially improved — additions to basis during any 30-month period must equal or exceed the adjusted basis of the property at the start of the period. Land is excluded from the basis comparison under final regs.
§ 1400Z-2(d)(3)(A)(iii) incorporates § 144(c)(6)(B): excludes golf courses, country clubs, massage parlors, hot tub or sun-tan facilities, racetracks or other gambling facilities, and liquor stores. Mixed-use projects may have de minimis exception.
Deferral runs to the earlier of disposition or 12/31/2026 (date now passed for new deferrals). Hold-period basis step-ups for 5/7-year holds are historical. The 10-year benefit — exclusion of post-investment gain on QOF interest disposition — remains available and is the dominant OZ benefit going forward.
TIC Compliance — Rev. Proc. 2002-22
Rev. Proc. 2002-22, § 6.01: no more than 35 co-tenants permitted. Most practitioners cap at 15 to maintain a safety margin and reduce Service scrutiny. Spousal joint tenancy counts as one co-tenant.
No single-co-tenant cap is imposed by Rev. Proc. 2002-22, but a high concentration may invite a "partnership in substance" reclassification challenge. Some practitioners use 50% as a soft ceiling.
Rev. Proc. 2002-22, § 6.05: hiring of any manager, sale, leasing of substantially all of the property, financing or refinancing, and bringing legal action require unanimous approval of all co-tenants. Less-than-unanimous decisions destroy TIC characterization.
Rev. Proc. 2002-22, § 6.02: each co-tenant must hold title as a tenant in common under local law. Holding through a partnership, LLC, or corporation defeats TIC treatment.
Rev. Proc. 2002-22, § 6.06: each co-tenant must share in income and expenses in proportion to its undivided interest. Special allocations or cash-flow waterfalls characteristic of partnerships defeat TIC treatment.
Rev. Proc. 2002-22, § 6.12: debt is "co-ownership debt" under which each co-tenant is severally liable for its proportionate share. Most commercial lenders require joint and several liability, presenting a structural tension. Cross-defaults and cross-collateralization are problematic.
Rev. Proc. 2002-22, § 6.07-6.10: the co-tenants cannot conduct an active business on the property. Typical structure: a single operator leases the property from all co-tenants on a master lease (often triple-net). The co-tenants are passive investors.
Rev. Proc. 2002-22, § 6.04: co-tenants cannot file a partnership return. Each reports its share on Schedule E (or equivalent). Filing Form 1065 is fatal — it admits the arrangement is a partnership.
Under Rev. Rul. 2004-86, a Delaware Statutory Trust is treated as a grantor trust for federal tax purposes — beneficial interests held by investors are treated as direct ownership of undivided fractional interests in the underlying property (eligible as § 1031 replacement property). Violation of any of the seven prohibitions reclassifies the DST as a business entity (partnership), defeating § 1031 eligibility for any acquisition still in progress and disrupting in-place exchanges retroactively.
Some DSTs interpose an Affiliated Master Tenant that leases the property from the DST and conducts operating activity. This permits some flexibility around Sin 5 and 6 because operational changes occur at the master-tenant level, not the DST level. The master tenant is typically a TRS-like entity owned by the sponsor or its affiliate.
Trust agreement contains a "springing LLC" provision allowing the trustee to convert the DST into an LLC upon a triggering event (e.g., loan default, lender demand for refinancing). The conversion exits Rev. Rul. 2004-86 compliance but preserves the property and gives the trustee operational flexibility to address the event.
Step 9 — Results & Output
Computed deal economics. Sensitivity table flexes exit price and hold period to show how returns shift. Save the configuration as a JSON file to reload later or to share with co-counsel; export a deal summary for term-sheet circulation.
Deal Verdict
Awaiting Inputs
Sources & Uses
Source
Amount
Use
Amount
Returns by Class
Class
Capital Contributed
Total Distributions
Profit
MOIC
IRR
Waterfall Trace
Tier
Description
Total Distribution
To LPs
To Sponsor
Remaining Pool
Sponsor Fees
Fee
Basis
Amount
Sensitivity — LP IRR Across Sale Price & Hold
The center cell reflects current inputs. Adjacent cells flex sale price by ±5% and ±10%, hold period by ±3 and ±6 months. Cells colored by IRR thresholds.
§ 704(c) — Three-Method Comparison
FIRPTA Analysis
UBTI Analysis — U.S. Tax-Exempt Investors
Blocker Tax Leakage
Specialized Compliance Dashboard
Structural Recommendations
Capital Account Roll-Forward
Roll-forward shows each member class’s § 704(b) book capital account and outside tax basis at three snapshots: opening (post-contribution), interim (mid-hold), and closing (post-disposition). Adjustments under § 743(b), § 734(b), and special allocations are flagged.
Member Class
Opening Cap Acct
Cumulative Allocations
Distributions
Closing Cap Acct
Outside Basis
§ 754 / § 743(b) / § 734(b) Analysis
Structure Diagram
Drag any node to reposition. Double-click to edit label. Click and press Delete to remove.
Structural Notes & Warnings
Step 10 — Deal Document Package
Generate the full deal document stack under Regulation D private placement exemption. All three levels are private placement — the distinction is the degree of disclosure, the breadth of investor pool, and whether general solicitation is permitted. Output is a single comprehensive HTML document with each component back-to-back, marked DRAFT · PRIVILEGED & CONFIDENTIAL, ready for your review and customization before execution.
Securities Compliance Level
Entity Structure
Configure the full deal entity structure. Each entity in the tree has its own state of formation and state-specific legal provisions in the generated documents. Exactly one entity must be designated as the Issuer — the one receiving subscription agreements from investors. Other entities (Holdco, Sponsor, Trust, Blocker, Feeder) may be added at any depth, with parent-entity references to express the ownership chain.
Authorized Signatories
Individuals authorized to sign the offering and deal documents on behalf of the Issuer and/or Sponsor. Typical: the Manager principal(s) (LLC), General Partner (LP), or designated officer (corp). Each signature block in the generated documents will list one signatory.
Investor List
Each investor receives a personalized Subscription Agreement and Accredited Investor Questionnaire in the final package. Capital commitments here should aggregate to (and match) the member class commitments from Step 2. Each investor must be assigned to one of the member classes you configured.
Document Generation Options
Embeds the Phase V Deal Memo content (executive summary, capital stack, waterfall, capital account roll-forward, FIRPTA/UBTI analysis, compliance dashboard, structural diagram, recommendations) as an Exhibit to the package.
Combined HTML opens in a new tab. Use browser print to PDF for distribution. Per-investor option produces one combined master document but with each investor’s Sub Agreement and AI Questionnaire repeated, ready to detach.
Output opens in a new browser tab. Use the browser’s Print → Save as PDF to convert. All documents are templates for your review and customization under your engagement letter; nothing is filed or transmitted automatically.