Which type of investment offers tax benefits and allows an individual to share directly in the earnings of the business?

The choice of a Direct Participation Program (DPP) as the correct answer reflects its unique characteristics. DPPs are investment vehicles that allow individuals to invest directly in business enterprises, such as real estate projects or limited partnerships, and they pass through income, deductions, and tax credits directly to the partners without incurring corporate tax. This structure enables investors to benefit from potential tax advantages, such as depreciation and other deductions that may offset income.

Moreover, DPPs provide investors with the opportunity to share directly in the earnings and profits of the business venture, aligning investor interests with the performance of the project. This means that as the business earns profits, those earnings can flow directly to the investors, thus creating a direct link between the performance of the underlying business and the investor's return.

In contrast, other options like common stock and preferred stock primarily represent shares in a corporation. While they may provide dividends and capital appreciation, they do not typically offer the same level of pass-through tax benefits associated with DPPs. Real Estate Investment Trusts (REITs) also allow investors to participate in real estate earnings but are structured to pay out dividends rather than pass-through tax benefits, making them different from DPPs regarding tax treatment.