Packaged Products: Other Packed Products Review Questions

All of the following are types of oil and gas direct participation programs EXCEPT: A: Balanced B: Income C: Exploratory D: Developmental

A: Balanced

What is the main objective of investing in Equity REITs? A: Income and growth B: Capital appreciation and stability C: Tax deductions and tax credits D: Speculation and aggressive gains

A: Income and growth

What would NOT be a suitable investment for someone looking for income? A: Raw Land DPP B: Existing Housing DPP C: Developmental Oil and Gas DPP D: Low Income Housing DPP

A: Raw Land DPP

What is the MOST important item to disclose to a customer who invests in a fund of hedge funds? A: The illiquidity of the investment B: The high fees and expenses of the investment C: The high risk of speculative options strategies used by hedge fund managers D: The lack of disclosure about the underlying hedge funds

A: The illiquidity of the investment

Which statement is TRUE regarding oil drilling programs? A: These programs incur intangible drilling costs which are 100% deductible in the year the drilling takes place B: These programs incur intangible drilling costs which are deductible over a 27 1/2 year period C: These programs give an immediate deduction for intangible drilling costs D: These programs provide an intangible drilling costs deduction over the expected life of the well

A: These programs incur intangible drilling costs which are 100% deductible in the year the drilling takes place

The manager of an unregistered hedge fund is typically compensated by a fee based on a: A: percentage of assets under management plus a percentage of profits B: percentage of net investment income only C: performance fee based on profits only D: performance fee based on exceeding a benchmark index only

A: percentage of assets under management plus a percentage of profits

Hedge funds are: A: private investments that are available only to accredited investors B: private investments that are available to any investor C: private investments that are available only to institutional investors D: public investments that trade OTC

A: private investments that are available only to accredited investors

Which type of oil and gas program is the most conservative? A: Exploratory B: Income(Production) C: Developmental D: Combination

B: Income(Production)

Which statement is TRUE regarding REITs? A: REITs issue common shares representing a proportional interest in an investment company B: REITs issue shares of beneficial interest representing an undivided interest in a pool of real estate investments C: REITs are similar to open-end investment company shares D: REITs are registered under the Investment Company Act of 1940

B: REITs issue shares of beneficial interest representing an undivided interest in a pool of real estate investments

Regarding an oil and gas "income" program, which statement is TRUE? A: The primary benefit is the depreciation deduction B: The primary benefit is the depletion deduction C: There are generous intangible drilling costs D: These programs are far riskier than wildcatting

B: The primary benefit is the depletion deduction

Which statement is TRUE about forming a limited partnership? A: All partners must be limited partners B: There must be at least 1 general partner and 1 limited partner C: More than 50% of the partners must be limited partners D: No more than 99 partners can be limited partners

B: There must be at least 1 general partner and 1 limited partner

For an investor seeking a tax sheltered investment, the primary advantage of a real estate direct participation program is the: A: high level of liquidity provided by the investment B: ability of the program to generate losses for tax purposes but provide positive cash flow C: ability to offset passive losses generated by the program against the investor's earned income D: ability of the program to generate increasing losses until liquidation

B: ability of the program to generate losses for tax purposes but provide positive cash flow

The advantage of a limited partnership business structure as opposed to a corporate business structure is that limited partnerships: A: are taxed at lower tax brackets than corporations B: allow for "flow through" of gain and loss, while corporations do not C: limit liability of owners while corporate shareholders have unlimited liability D: have a better "track record" for economic success than corporations

B: allow for "flow through" of gain and loss, while corporations do not

A customer wishes to invest in an oil and gas program that provides both an immediate tax benefit, as well as a reasonable chance of continuing tax benefits. The best recommendation is a(n): A: exploratory program B: developmental program C: income program D: wildcat program

B: developmental program

The depletion deduction is NOT allowed for: A: gas B: wheat C: iron ore D: timber

B: wheat

A well that is drilled on leases not adjacent to proven reserves is known as a: A: step-out well B: wildcat well C: service well D: stripper well

B: wildcat well

Which statement is FALSE about a fixed UIT? A: Each trust unit represents a piece of a diversified portfolio of underlying securities B: An investor can reduce concentration risk with a relatively small dollar investment C: A professional manager can change the portfolio composition in response to a changing outlook for the underlying investments D: Ongoing expenses are low, making this an efficient investment

C: A professional manager can change the portfolio composition in response to a changing outlook for the underlying investments

Which type of real estate limited partnership offers an immediate depreciation benefit? A: New Construction B: Raw Land C: Existing Housing D: All of the above

C: Existing Housing

When comparing Real Estate Investment Trusts (REITs) to Real Estate Limited Partnerships (RELPs), all of the following statements are true EXCEPT: A: REITs allow for flow through of gain B: RELPs allows for flow through of gain C: REITs allow for flow through of loss D: RELPs allow for flow through of loss

C: REITs allow for flow through of loss

Which statement is TRUE regarding the tax status of limited partnerships? A: Partnership distributions are tax free to all partners B: Tax liability only exists at the partnership level C: Tax liability only exists at the partner level D: Tax liability exists at both the partnership and the partner level

C: Tax liability only exists at the partner level

Real Estate Investment Trusts are not suitable as tax advantaged investments because they: A: have too many corporate characteristics B: do not qualify for conduit tax treatment under Subchapter M C: are not allowed to pass operating losses to shareholders D: are not allowed to pass capital gains to shareholders

C: are not allowed to pass operating losses to shareholders

An oil and gas program that is designed to take advantage of the depletion allowance, without immediate deductions is a(n): A: exploratory program B: developmental program C: income program D: combination program

C: income program

REITs can invest in all of the following EXCEPT: A: mortgages B: real estate C: limited partnerships D: other REITs

C: limited partnerships

In an oil and gas income program, there are: A: high intangible drilling costs and high depletion deductions B: high intangible drilling costs and no depletion deductions C: no intangible drilling costs and high depletion deductions D: no intangible drilling costs and no depletion deductions

C: no intangible drilling costs and high depletion deductions

REITs may be organized as: A: general partnerships B: management companies C: trusts D: limited partnerships

C: trusts

Which statement is TRUE about limited partners and general partners A: Limited partners have no liability and general partners have limited liability B: Both general and limited partners have limits on their liability C: Both general and limited partners have no limits on their liability D: General partners have unlimited liability while limited partners have limited liability

D: General partners have unlimited liability while limited partners have limited liability

All of the following are types of real estate direct participation programs EXCEPT: A: New Construction Real Estate Limited Partnership B: Existing Housing Real Estate Limited Partnership C: Raw Land Real Estate Limited Partnership D: Mortgage Real Estate Investment Trust

D: Mortgage Real Estate Investment Trust

What does a BDC invest in? A: Hedge funds B: Small cap stocks C: Large cap stocks D: Privately-held companies

D: Privately-held companies

Which statement is TRUE about tax shelters that invest in raw land? A: Raw land is depreciable and qualifies for the depletion deduction B: Raw land is depreciable but does not qualify for the depletion deduction C: Raw land is not depreciable and qualifies for the depletion deduction D: Raw land is not depreciable and does not qualify for the depletion deduction

D: Raw land is not depreciable and does not qualify for the depletion deduction

All of the following statements are true regarding investments in a real estate limited partnership EXCEPT: A: Real estate limited partnership investments are considered passive investments B: When the real estate is sold, capital gains may be generated C: Tax deductible losses are obtained through depreciation deductions, while positive cash flow is generated D: Real estate limited partnership investments are liquid

D: Real estate limited partnership investments are liquid

All of the following are major tax benefits of real estate limited partnerships EXCEPT: A: The real estate can be depreciated, even if its market value is increasing B: The property being purchased can be financed with a mortgage, reducing the cash down payment C: Interest on loans is fully deductible D: When the real estate is sold, all profits are taxed at preferential short term rates

D: When the real estate is sold, all profits are taxed at preferential short term rates

When comparing a mutual fund to a hedge fund, all of the following are true EXCEPT hedge funds: A: are subject to less regulation B: use aggressive investment strategies and have higher risk C: are only available to qualified purchasers D: are liquid

D: are liquid

A fund of hedge funds: A: must invest at least 75% of its assets in hedge funds B: must invest at least 90% of its assets in hedge funds C: must invest in at least 10 different hedge funds D: can invest in any number of hedge funds

D: can invest in any number of hedge funds

Fixed UITs issue: A: negotiable securities and have an investment manager B: negotiable securities and are non-managed C: redeemable securities and have an investment manager D: redeemable securities and are non-managed

D: redeemable securities and are non-managed

When discussing hedge funds with customers, the registered representative should make the customer aware of all of the following risk factors EXCEPT: A: these funds often hold illiquid investments B: hedge Funds use leverage and other speculative practices C: hedge Fund managers place limitations on withdrawal of funds D: these funds provide performance that is often uncorrelated to the stock market.

D: these funds provide performance that is often uncorrelated to the stock market.