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:
I. To meet