REITs and DPPs: Rapid Fire

What this video covers

• Why a real estate investment trust (REIT) has one-way flow-through of income only, while a direct participation program (DPP) has two-way flow-through of both income and losses via Schedule K-1
• How the 90% distribution rule, 95% income test, and 75% asset tests differ in purpose and which errors the exam plants by swapping them
• Why REIT ordinary dividends are taxed as ordinary income, not at qualified dividend rates, and why return of capital reduces basis rather than being immediately taxable
• How limited partners maintain limited liability, and exactly which management activities cause an LP to lose that shield and assume unlimited liability like a general partner
• Why DPP passive losses only offset passive income, never active salary or portfolio income, and what happens to suspended losses and phantom income
• How oil and gas program risk and tax benefits are inverse: exploratory (wildcat) programs have highest risk and highest intangible drilling cost (IDC) deductions; income programs have lowest risk and least tax benefit
• The hard numbers that govern suitability and compensation: 10% underwriting cap, 15% organization and offering expense presumption, 2% rollup solicitation, $300 non-cash gift limit, and the economic soundness test