Series 7 Exam Question 74: Answer and Explanation

Question: 74

Which of the following is a benefit of investing in a direct participation program?

• A. Limited liability
• B. Pass through of income and losses
• C. Professional management
• D. All of the above

Correct Answer: D

Explanation:

D. All of the choices listed are benefits of investing in a limited partnership. Investors are certainly getting (or hoping for) professional management by way of a general partner. Also, since a partnership is not taxed as a corporation, the gains and losses are passed through to investors. In addition, limited partners' losses are limited to the amount invested plus any recourse loans (for real estate DPPs only).