REITs and DPPs: Rapid Fire
Chapters in this video
- 0:00 REIT income flow versus DPP tax flow
- 1:23 The one-way street trap: losses do not pass down
- 2:05 75%, 95%, 90%, and the 5/50 rule
- 3:02 Non-traded REITs and the liquidity trap
- 3:54 GP versus LP: structure, limits, and liability danger
- 5:06 Economic soundness and Riley the rep's bad advice
- 5:53 Oil and gas: risk versus tax benefit, IDCs versus tangibles
- 7:23 Suitability: who should never be pitched a DPP
- 8:28 Rapid-fire exam recap
What this video covers
- Why a REIT is a one-way street (income only, no loss pass-through) while a DPP is a two-way street (income, gains, losses, deductions, and credits all flow via Schedule K-1)
- How the 90% distribution rule differs from the 95% income test, and why swapping them costs points
- Why non-traded REITs being SEC-registered does NOT mean they are liquid, and what that means for customer suitability
- How a limited partner (LP) can accidentally become a general partner (GP) with unlimited liability by participating in management
- Why the economic soundness test forbids recommending a DPP solely for tax write-offs, and what the three unsuitable customer profiles are
- How oil and gas DPPs present an inverse relationship between risk and tax benefit, and the distinction between intangible drilling costs (IDCs) versus tangible drilling costs
- The hard numbers that appear on every rapid-fire recap: 90% distribution, 15% percentage depletion, 10% underwriting compensation cap, 2% rollup solicitation, and $300 non-cash gift limit
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