2.17 Direct Participation Programs (DPPs)
DPPs allow investors to participate directly in the cash flows, depreciation, and tax deductions of real estate, oil and gas, and equipment leasing ventures.
Key FINRA Exam Takeaways
- DPPs (typically Limited Partnerships) pass through BOTH income and passive losses directly to investors.
- Passive losses can ONLY offset passive income (cannot offset salary or dividends).
- General Partner (GP): Unlimited liability, manages daily business, owes fiduciary duty.
- Limited Partner (LP): Limited liability (capped at investment), passive investor, no management voice.
- Illiquid: Units do not trade on public exchanges; transfer requires GP consent.
Knowledge Checkpoint • Section 2.17
In a direct participation program (DPP) structured as a limited partnership, which participant exercises management control and assumes unlimited personal liability?