TAXABLE INCOME AND TAX BASIS

12 Months Ended

Dec. 31, 2020

TAXABLE INCOME AND TAX BASIS

TAXABLE INCOME AND TAX BASIS

NOTE 13. TAXABLE INCOME AND TAX BASIS

Taxable income reportable by the Partnership and includable in its partners’ tax returns is different than financial statement income because of tax free exchanges, different depreciation methods, different tax lives, other items with limited tax deductibility carryovers and timing differences related to prepaid rents, allowances and intangible assets at significant acquisitions. Federal taxable income of approximately $8,578,000 was approximately $7,153,000 more than statement income for the year ended December 31, 2020.The Federal cumulative tax basis of the Partnership’s real estate at December 31, 2020 is approximately $7,332,000 more than the statement basis. The primary reasons for the difference in tax basis are tax free exchanges, accelerated depreciation and bonus depreciation. The Partnership’s Federal tax basis in its joint venture investments is approximately $1,476,000 more than statement basis. State taxable income may be significantly different due to different tax treatments for certain items.

Certain entities included in the Partnership’s consolidated financial statements are subject to certain state taxes. These taxes are not significant and are recorded as operating expenses in the accompanying consolidates financial statements.

The following reconciles GAAP net income to taxable income:

	For the year ended
	December 31,
	2020		2019		2018
	(in thousands)
Financial statement (“book”) net income	$	1,425	$	6,547	$	4,169
Book/Tax differences from depreciation and amortization		5,426		(10,177)		(4,675)
Book/Tax differences on tax free exchanges		1,201		1,223		1,087
Book/Tax differences from Investment Properties		(69)		1,624		313
Increase in prepaid rent and allowances		936		1,226		234
Business interest limitation		—		1,596		3,713
Other items		(341)		—		—
Taxable income	$	8,578	$	2,039	$	4,841

Allowable accelerated depreciation deductions were extended through 2018. The 2018 tax law changes had a significant impact on the taxable income of the Partnership. Future tax law changes may significantly affect taxable income.

The Partnership adopted the amended provisions related to uncertain tax provisions of ASC 740, Income Taxes. As a result of the implementation of the guidance, the Partnership recognized no material adjustments regarding its tax accounting treatment. The Partnership expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which would be included in general and administrative expense.

In the normal course of business the Partnership or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates, where applicable. As of December 31, 2020, the tax years that generally remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2017 forward.