Chapter 7 Practice Questions
- 1. If a DPP needs to be liquidated, in what order are debts paid off?
- A. Secured lenders, limited partners, general partner(s), other creditors
- B. Limited partners, secured lenders, other creditors, general partner(s)
- C. Secured lenders, other creditors, limited partners, general partner(s)
- D. Limited partners, general partner(s), secured lenders, other creditors
- 2. Pick the correct role of the syndicator:
- A. Assembles the partnership and files the appropriate documentation with the state
- B. Markets the DPP to potential investors
- C. Makes investment and other business decisions
- D. Manages the properties a real estate DPP purchases
- 3. What is true under partnership democracy?
- I. The limited partners and general partner have equal votes in day-to-day management decisions for the DPP.
- II. The limited partners may invest in businesses that compete with the DPP.
- III. The limited partners may sue to remove the general partner.
- IV. The limited partners may not vote to dissolve the DPP.
- A. I and II
- B. II and III
- C. III and IV
- D. I and IV
- 4. Accelerated depreciation:
- A. Makes an asset’s book value decline more slowly than it would under straight-line depreciation
- B. Makes an asset’s book value decline faster than it would under straight-line depreciation
- C. Makes the useful life of a DPP’s asset shorter than under straight-line depreciation
- D. Makes the useful life of a DPP’s asset longer than under straight-line depreciation
- 5. If an investor believes she will have a large amount of passive income over the next couple of years, which type of DPP of those listed below would be the most reasonable investment?
- A. Oil and gas exploration
- B. Purchase of an unfinished condominium development
- C. Equipment leasing
- D. Commercial real estate leasing
- 6. To invest in a direct participation program, an investor needs: