Chapter 11

Working with Direct Participation Programs

IN THIS CHAPTER

Bullet Understanding the specifics of DPPs

Bullet Distinguishing a limited partner from a general partner

Bullet Getting a handle on the paperwork and taxes involved

Bullet Looking at the different types of DPPs

Direct participation programs (DPPs) can raise money to invest in real estate, oil and gas, equipment leasing, and so on. More commonly known as limited partnerships, these businesses are somewhat similar to corporations (stockholder-owned companies). However, limited partnerships have some specific tax advantages (and disadvantages) that a lot of other investments don’t have. According to tax laws, limited partnerships are not taxed directly; the income or losses are passed directly through to the investors.

DPPs were once known as tax shelters because of the tax benefits to investors; however, tax law changes have taken away a lot of these advantages. As a result, DPPs have somewhat fallen out of favor for investors (though not entirely for the Series 7 designers).

In this chapter, I explain the differences between limited and general ...

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