Series 7 Exam Question 246: Answer and Explanation

Question: 246

Investing in real-estate DPP programs can provide which of the following advantages?

I. Depreciation

II. Appreciation

III. Depletion

IV. Cash flow

• A. I and II
• B. III and IV
• C. I, II, and IV
• D. I, II, III, and IV

Correct Answer: C

Explanation:

C. Real estate DPPs (direct participation programs — limited partnerships) provide advantages for investors such as depreciation deductions, appreciation potential, and cash flow, but not depletion. Depletion only applies to partnerships that deal in natural resources that can be depleted (used up), such as oil or gas.