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Difficulty: EasyDirect Participation Programs and REITs

In a Direct Participation Program (DPP) structured as a limited partnership, limited partners bear unlimited personal liability for all financial obligations and debts incurred by the partnership.

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Answer

The statement is False. Limited partners in a Direct Participation Program (DPP) have liability limited to their invested capital, whereas unlimited liability is borne by the general partner.
The statement is false because limited partners in a Direct Participation Program (DPP) have limited liability. Their risk of financial loss is capped at the amount of money they have invested in the program. Unlimited personal liability for business debts falls solely on the general partner.

Step-by-Step Solution

1
Identify the roles and risk structures within a Direct Participation Program (DPP) limited partnership.
DPPs feature two types of partners: General Partners (GPs), who manage operations, and Limited Partners (LPs), who contribute capital.
Understanding the division of management responsibilities and liabilities is fundamental to assessing investor risk in DPPs.
2
Determine the liability limits for limited partners versus general partners.
Limited partners can lose no more than their invested capital (plus any committed funds), while general partners carry full, unlimited personal liability for partnership obligations.
This protection is a defining characteristic of being a limited partner in a DPP.

Key Concept

Liability Differences Between General Partners and Limited Partners in DPPs
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Topics

Direct Participation Programs and REITs

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