SIE Understanding Products and Their Risks Question 70: Answer and Explanation

Question: 70

Which of the following is correct regarding assets and liabilities of a direct participation program that is a real estate limited partnership?

• A. The limited partnership owns all assets.
• B. The general partner would not guarantee a loan.
• C. The general partner would not receive compensation for services, other than profit distributions, as the limited partners receive.
• D. Limited partners may guarantee a loan.

Correct Answer: A

Explanation:

A: Choice A is correct because all assets are held in the name of the limited partnership. Choice B is incorrect because the general partner could guarantee a loan. Choice C is incorrect because the general partner does receive compensation for managing the limited partnership, in addition to receiving a proportionate part of distributed profits. Choice D is incorrect because limited partners would not guarantee a loan.