Series 7 practice questioneasyAlternative Investments — DPPs
In a direct participation program (DPP), losses flow through to:
- AThe general partner only
- BThe IRS directly
- CThe partnership's corporate tax return
- DThe limited partners' personal tax returns✓ Correct answer
Explanation
Why D — The limited partners' personal tax returns
DPPs are structured as limited partnerships that pass through income, gains, losses, deductions, and credits directly to the limited partners' individual tax returns. The partnership itself files an informational return (Form 1065) but does not pay entity-level taxes. This pass-through structure is the defining feature of direct participation programs.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 758+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Investment Information & Recommendations questions
- Under the at-risk rules for DPPs, a limited partner's deductible losses are limited to:
- A hybrid REIT combines which two investment strategies?
- Passive income from a limited partnership can be offset by:
- A client is considering a non-traded REIT. Which of the following risks is MOST specific to non-traded REITs compared…
- An investor contributes $50,000 to an oil and gas limited partnership and also signs a recourse note for $30,000. The…
- Which type of REIT is most sensitive to interest rate changes?
- Which type of DPP typically offers the greatest potential for depletion deductions?
- An equity REIT primarily generates income from: