DPP Overview
Chapters in this video
- 0:00 The double-tax problem: Ivy versus the IRS
- 1:06 Direct Participation Program (DPP) defined: pass-through taxation
- 2:05 C corporation versus DPP: two taxes versus one tax
- 3:15 Active recall check: K-1 or 1099-DIV
- 3:48 The four common DPP types
- 4:24 FINRA suitability and compensation rules
- 5:15 Passive activity loss limitation: the exam trap
- 6:17 Rapid-fire exam recap
What this video covers
- Why a Direct Participation Program (DPP) avoids corporate-level taxation, and how that compares to the double taxation a C corporation faces
- The tax form distinction: K-1 for DPP investors versus 1099-DIV for C corporation shareholders, and why mixing them up costs points
- The four common DPP business purposes: real estate, oil and gas, equipment leasing, and agriculture
- FINRA suitability and compensation rules that govern registered representatives selling DPPs to retail investors
- Why passive losses from a DPP can only offset passive income, not W-2 wages or ordinary investment income like dividends
- What it means for an investor to be passive in a DPP, and how that status triggers the passive activity loss limitation
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