The $300K Mistake and What It Means for Fund Managers

A professional group once came to us with their tax return. Their CPA had been filing for years without making a simple election that would have unlocked depreciation on their building. Once we reviewed the situation, we implemented the grouping election and saved the partners $300,000 in taxes in one year.

This was not a complex strategy. It was not aggressive. It was basic tax law. And it was completely missed by their box-checker CPA.

For fund managers, the risks are even higher.

Where Fund Managers Miss Big Savings

1. Grouping Elections
   Fund managers often operate multiple entitiesm; management companies, GPs, LPs, side vehicles. If elections aren’t made properly, depreciation and losses get trapped where they provide the least benefit.

2. Depreciation Allocations
   GPs have the ability to capture outsized allocations of year-one depreciation when documents are structured correctly. If your CPA doesn’t review fund docs, you could miss six figures of deductions that should have flowed to you.

3. Entity Selection
   Management companies reporting large profits on Schedule C are overpaying in self-employment tax and missing the chance to take advantage of QBI and other deductions.

4. Coordination With Attorneys
   Attorneys draft operating agreements, but they aren’t tax strategists. If your CPA isn’t reviewing your docs for tax efficiency, you’re leaving money behind.

The Hidden Cost of Missed Opportunities

Every missed election is another year of overpaying. And the cost isn’t just what you send to the IRS. It’s the compound growth you lose by not reinvesting those savings into your next deal.

Fund managers compete on returns. Losing hundreds of thousands to the IRS because your CPA didn’t bring up an election isn’t just poor tax planning — it’s poor fund management.

Take Action Before Year-End

We are in September. There is still time to review your prior returns, identify missed opportunities, and make structural changes that will impact your 2025 return.

Don’t wait until tax season to find out what you missed. By then, it’s too late.

At Stonehan, we don’t file history. We build battle plans. If you want to stop overpaying and start putting more money back in your pocket — and your investors’ — now is the time.

Book Your Tax Strategy Session