If a recourse debt is converted to a nonrecourse debt
, the conversion will affect the at-risk basis calculation for the partners, both directly by the characterization shift (nonrecourse debt
does not provide at-risk basis) and indirectly by its effect on debt allocation.
One factor in lower average loan-to-value ratios is the current popularity of nonrecourse debt
, such as commercial mortgage backed securities.
Regarding their financing, finance companies relied heavily on nonrecourse debt
associated with structured financing activities ($648 billion) and notes, bonds, and debentures ($242 billion) to fund their lending activities in 2015 (table 3).
A second exception to IRC section 704(a) is the allocation of items based on nonrecourse debt
. Pursuant to Treasury Regulations section 1.704-2(e), allocations of losses and deductions attributable to partnership nonrecourse liabilities do not have economic effect because the creditor alone bears any economic burden that corresponds to those allocations.
Any discharge or forgiveness of the nonrecourse debt
, however, does not result in taxable cancellation of debt income (CODI); that is because the lender cannot legally pursue any other assets of the borrower.
As discussed below, on her 1938 federal income tax return, Beulah reported the transaction as the sale of a nondepreciable equity interest in the Brooklyn Apartment Building with a zero basis, rather than the physical property itself in exchange for $2,500 (not treating the nonrecourse debt
relief as an economic benefit).
(This requirement does not apply to the extent that a partner's share of the net decrease in minimum gain is caused by a guarantee, refinancing, or other change in the debt instrument causing it to become partially or wholly recourse debt or partner nonrecourse debt
, and the partner bears the risk of economic loss for the liability.
While earnings before interest expense and income taxes (EBIT) for the segment still tumbled 12.6% to $83 million, overall profitability soared 71.4% to $60 million as interest expense on nonrecourse debt
collateralized by credit card receivables plunged 61.7% to $23 million.
: lender cannot hold the borrower personally liable for it and may go only against the value of the property that is securing the debt to collect.
He would not rule out another round of nonrecourse debt
such as the pounds 485 million raised to upgrade and reduce sulphur dioxide emissions at Rugeley earlier this year.
Tata Coffee, India's largest coffee plantation company, said the acquisition would be financed by a combination of equity and nonrecourse debt
. The company's acquisition of Eight O'Clock Coffee Company follows a series of acquisitions by the Tara Tea group including Tetley (U.K.) for $432 million and U.S.
Before reviewing the rules for nonrecourse debt
, it is helpful to view the relevant history of the court cases that led to the development of the rules.