4.3 REITs and Direct Participation Programs
Alternative pooled real estate and partnership vehicles provide tax-advantaged income and non-correlated assets, but carry unique liquidity and tax-reporting considerations.
Key NASAA Exam Takeaways
- REITs must distribute at least 90% of taxable net investment income to shareholders to avoid corporate-level taxation.
- REITs pass through income and capital gains, but DO NOT pass through losses to shareholders.
- Direct Participation Programs (DPPs / Limited Partnerships) pass through BOTH income and losses directly to partners.
- Limited partners enjoy limited liability, whereas general partners have unlimited personal liability.
Interactive Knowledge Checkpoint • Section 4.3
Which of the following is an accurate distinction between a Real Estate Investment Trust (REIT) and a Direct Participation Program (DPP) real estate limited partnership?