Unit 11: Other Packaged Products

Question 1

REIT

Answer 1

Exchange-traded
75% real-estate income
75% invested in real-estate
90% taxable income distributed to shareholders
no losses passed

Question 2

DPPs

Answer 2

Pass through all gains and losses
Non-traded, illiquid

Question 3

DPPs Pros

Answer 3

Flow-through income and expenses
Limited liability
Outside management

Question 4

DPPs Cons

Answer 4

High risk
Illiquid
Long-term commitment

Question 5

Where are organization documents filed?

Answer 5

Home state

Question 6

LPs are liable for

Answer 6

Initial investment and Recourse Loans

Question 7

Raw Land DPPs

Answer 7

No income
No tax shelter
NO DEPRECIATION

Most Risky

Question 8

New Construction (Historic Rehab) DPPs

Answer 8

Cos overruns (con)
Delayed tax benefits
MOST DEPRECIATION

Question 9

Existing Property (Gov’t Asst. Housing)

Answer 9

Immediate income & tax benefits
Lowest rate of return
Least Risky but not safe

Question 10

Wildcat (Exploratory) DPPs

Answer 10

immediate tax shelter for intangible drilling costs
Super Risky

Question 11

Developmental DPPs

Answer 11

Drill near existing wells
Immediate intangible drilling costs, but less than wildcat

Question 12

Income DPPs

Answer 12

Immediate income & tax benefits
Lowest rate of return

Question 13

Primary and secondary objectives of DDPs

Answer 13

Primary: economic viability

Secondary: potential tax shelter & pass through losses

Question 14

Requirements for RRs with discretionary authority to execute DPPs in customer’s account:

Answer 14

prior written consent