What characterizes DPP programs?

DPP, or Direct Participation Programs, are investment vehicles that allow investors to participate directly in the cash flow and tax benefits of a partnership. One of the key characteristics of DPPs is the treatment of income and losses for tax purposes.

In a DPP, the income generated by the program is typically considered passive, meaning it does not actively engage the investor in the generation of income. Passive income can include earnings from rental real estate, limited partnerships, or other forms of income that do not require active participation. Investors in DPPs can use their passive income to offset any passive losses they may incur in their other investments, creating tax-efficient opportunities.

This characteristic is important for investors who may have other sources of passive income and want to minimize their tax liabilities effectively. By allowing passive income to offset passive losses, DPPs provide a strategic advantage in managing tax burdens related to investment portfolios.