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Series 7 > chapter 17 > Flashcards

chapter 17 Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Name some of the different types of Direct Participation Programs (DPPs).

A

General partnerships, limited partnerships, joint ventures, Subchapter S corporations

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2
Q

A limited partnership could be formed by a minimum of how many individuals?

A

2 - one general partner, one limited partner

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3
Q

What are the two types of partners in a limited partnership?

A

general partner and limited partner

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4
Q

Describe the liability of the two partners in a limited partnership.

A

General partners have unlimited liability, while limited partners have limited liability

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5
Q

The _________ partner is in charge of management and decision-making for the partnership.

A

general partner

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6
Q

What actions are considered a violation for the general partner of a limited partnership?

A

Admit another general partner, change the partnership, compete with the program, personally use partnership assets

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7
Q

What are some of the acceptable actions for the limited partner?

A

Inspecting partnership books, suing the general partner, voting on major issues affecting the partnership, competing

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8
Q

What document is filed with the state of legal domicile to create a partnership?

A

Certificate of Limited Partnership

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9
Q

What does the Partnership Agreement define?

A

The rights, liabilities, and obligations of each partner

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10
Q

____% of the gross proceeds represents the maximum allowable underwriting compensation for a limited partnership.

A

10%

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11
Q

To invest in a limited partnership, an investor must complete the _________________________.

A

Subscription agreement

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12
Q

What does a Limited Partnership’s Subscription Agreement state in regard to a purchaser?

A

He’s aware of risks, can meet suitability standards, has read disclosure document, and knows the required investment.

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13
Q

To whom does the limited partner make her check payable?

A

The party named in the Subscription Agreement

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14
Q

To become a limited partner, the __________________’s signature is required on the Subscription Agreement.

A

general partner’s

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15
Q

A limited partner could lose limited liability status for what reasons?

A

Taking an active role in the management of the program (hire/fire employees or negotiate contracts)

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16
Q

Over-development and high leverage are the risks associated with a __________________ Program.

A

new construction

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17
Q

A major advantage to investing in Government Assisted Housing Programs is the availability of _____________.

A

tax credits

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18
Q

What is the primary disadvantage to Government Assisted Housing Programs?

A

The historic lack of potential appreciation

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19
Q

What program generates no cash flow and is based on the speculation of land value appreciation?

A

Raw Land Program

20
Q

True or False: Raw land is not a depreciable asset.

A

True

21
Q

Exploratory Drilling Programs are also referred to as _______________.

A

Wildcatting

22
Q

What type of oil and gas program drills for new oil reserves in unproven areas?

A

Exploratory (wildcatting)

23
Q

________________ Drilling Programs drill in proven areas.

A

Developmental

24
Q

___________ Drilling Programs drill in proven areas and also look for new oil.

A

Balanced

25
Q

True or False: Income Programs purchase already producing wells, but offer few intangible drilling costs.

A

True

26
Q

What’s the difference between straight-line depreciation and accelerated depreciation?

A

Straight-line has the same deduction each year, while accelerated has larger deductions in the early years.

27
Q

__________ is the deduction allowed for naturally wasting assets.

A

depletion

28
Q

Name some natural resource wasting assets.

A

Oil, gas, gold, and timber; but not wheat

29
Q

Passive losses can only be used as deductions against ____________________.

A

passive income

30
Q

True or False: Passive income is income derived from dividends and interest generated by securities in a portfolio.

A

False. Passive income is derived from an investment in a direct participation program (e.g., limited partnership).

31
Q

True or False: Investment Tax Credits are applied directly against an investor’s tax liability.

A

True. Tax Credits provide a dollar-for-dollar tax savings.

32
Q

What benefit will a tax deduction provide for an investor?

A

Deductions reduce an investor’s taxable income with a tax savings found by multiplying the deduction by the tax bracket.

33
Q

What happens when an investor’s passive losses exceed her passive income?

A

She is able to carry forward the passive losses

34
Q

The ____________________ is the point at which a program stops losing and starts making money.

A

cross-over point

35
Q

When a partner sells his interest in a partnership, what can he do with the remaining losses?

A

at that point Passive losses can be deducted against any type of income (passive or non-passive).

36
Q

Name the program where the areas to be drilled have not been defined at the time the program is created?

A

Blind Pool

37
Q

True or False: Limited partnership units are illiquid and require permission of the general partner to sell.

A

True

38
Q

____________ Partners are the primary contributors of capital.

A

Limited

39
Q

What is the order of liquidation for a limited partnership?

A

1) Secured Creditor 2) General Creditor 3) Limited Partner 4) General Partner

40
Q

General Partners must contribute at least ____% of the capital.

A

1%

41
Q

True or False: DPPs are pass-through investments.

A

True

42
Q

What does it mean to say “a limited partnership is a pass-through investment?”

A

The results of the business venture (profits and losses) flow through directly to the investor.

43
Q

Is income generated by a limited partnership taxed once or twice?

A

Only once, and it is at the partner’s level. The program itself is not a taxable entity.

44
Q

Regarding limited partnerships, what is the difference between a managed and non-managed offering?

A

Managed use an underwriting syndicate; non-managed offerings use a wholesaler rather than a syndicate.

45
Q

What is the role of a wholesaler when dealing with limited partnerships?

A

A wholesaler assists in marketing the partnership to other BDs as well as educating RRs.

Series 7 (25 decks)

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