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.
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