Unit 2 - Session 10 - Alternative Investments & Other Assets

Question 1

Hedge Funds

Answer 1

Alternative investments, usually structured as LP

Question 2

Direct Participation Programs (DPP)

Answer 2

Many of these are limited partnerships allow the economic consequences of a business to flow through to investors - usually ownership units versus shares. These are usually public offerings or private placements

Question 3

Private Placements

Answer 3

Usually offered to accredited investors, and consists of large contributions by LPs (such as $100k or more)

Question 4

Publicly Offered Limited Partnership

Answer 4

a large number of investors make relatively small contributions of capital ($1,000-$5,000). Unregistered so avoid regulation and registration requirements

Question 5

Subscription Agreement

Answer 5

An investor or buys LP unit(s) must complete and sign a subscription agreement, which includes the investors net worth and annual income and a power or attorney form appointing the GP as the agent of the partnership

Question 6

Tax on LPs

Answer 6

LPs are considered passive investors, therefore any income received is passive income, and any losses received can only offset passive income. Passive losses can be carried forward to the next year.