SIE Understanding Products and Their Risks Question 17: Answer and Explanation

Question: 17

Which of the following is a tax benefit of the investment structure of direct participation programs (DPPs)?

• A. Accelerated depreciation
• B. Exemption of some income from taxation
• C. Avoidance of double taxation
• D. Extended tax reporting deadlines

Correct Answer: C

Explanation:

C: DPPs have pass-through tax treatment, which avoids double taxation, as occurs with corporate dividends. Choice A, accelerated depreciation, Choice B, exemption of some income from taxation, and Choice D, extended tax reporting deadlines, are not accomplished by using a DPP.