SIE Understanding Products and Their Risks Question 18: Answer and Explanation

Question: 18

Which of the following is common to both limited partnerships and tenant in common (TIC) transactions?

• A. They may involve investment in real estate.
• B. Each investor may sell interest to another investor with approval by the general partner.
• C. Significant decisions are decided by a majority of ownership interest.
• D. The IRS code limits the number of owners to thirty-five.

Correct Answer: A

Explanation:

A: Limited partnerships (LPs) and tenant in common (TIC) transactions often involve investment in real estate. Choice B is true of LPs, but change in TIC participants requires acceptance of the new investor by the bank making the loan. Choice C is true of LPs, but TICs require unanimous consent. Choice D is true of TICs, whereas LPs may be limited to fewer than five hundred investors by securities law.