In general, a recourse liability is a liability for which the borrower is personally liable and which extends to all of the borrower's assets. Nonrecourse Nonrecourse debt or a nonrecourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. liabilities require the lender to look only to the property that secures the liability for repayment.Nonrecourse debt
Non-Recourse Liabilities means, in respect of the Corporation or any subsidiary thereof as of a given date, the non - recourse liabilities as described in subparts (a) through and including (h) of the definition of “ Total Borrowings ” below and of the types, if any, presented in the Corporation’s consolidated financial statements.
▪Only recourse andqualified nonrecourse liabilities can be included in the partners’ at-risk amounts per IRC § 465(b)(2),(6) OUTSIDE BASIS VS. AT-RISK IN ACTIVITY Recourse: Nonrecourse: Qualified Nonrecourse
Qualified liabilities 1.707-5(a)(6)(ii) If an otherwise qualified liability is also a recourse liability, it is only a qualified liability to the extent the liability is not in excess of value of transferred property 106TITLE Qualified liabilities
The LLC believed that since members personally guaranteed the loan, the loan met the definition of a recourse liability under the Section 752 regulations and therefore should be treated as a recourse liability for Section 1001 purposes. Chief Counsel did not reach a conclusion as to whether the loan was recourse or nonrecourse.
Understanding Recourse Recourse provides the legal means for a lender to seize a borrower's assets if the borrower defaults on a debt. If the debt is full recourse, the borrower is liable for the full amount of the debt even to the extent it exceeds the value of the collateralized asset.
After collateral is collected, lenders of recourse loans may go after a borrower's other assets if they have not recouped all of their money. With a non-recourse loan, lenders can collect the collateral but may not go after the borrower's other assets.
Non-recourse debt is a type of loan secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount.
Nonrecourse Liabilities. A partnership liability is nonrecourse if no partner, or person related to a partner, bears the economic risk of loss. In the partnership context, a nonrecourse liability is only paid in full out of the partnership's profits. There are generally two types of nonrecourse liabilities: 1.
A non-recourse loan is one where, in the case of default, a lender can seize the loan collateral. However, in contrast to a recourse loan, the lender cannot go after the borrower's other assets—even if the market value of the collateral is less than the outstanding debt.
A partnership generally allocates recourse liabilities to the partner(s) that ultimately bear the economic obligation to pay the partnership's liability if the partnership becomes completely worthless.
Definition of nonrecourse : being or based on an agreement in which the lender has no right of recourse to the borrower's assets beyond stated limits a nonrecourse note a nonrecourse loan.
Generally, excess nonrecourse liabilities are allocated to the partners in proportion to how they share profits. The partnership may specify in the partnership agreement each partner's share of profits for purposes of allocating excess nonrecourse liabilities.
Primary tabs. A phrase meaning that one party has no legal claim against another party. It is often used in two contexts: 1. In litigation, someone without recourse against another party cannot sue that party, or at least cannot obtain adequate relief even if a lawsuit moves forward.
Recourse loans, which are the norm for almost all bank-funded commercial real estate loans, require a personal guaranty. If the borrower is an individual, then the act of signing the Promissory Note creates personal liability (i.e., recourse) on their part.
Nonrecourse liabilities can provide basis for distributions, but generally do not provide basis for purposes of the at-risk rules.
The difference between recourse and non-recourse debt is the ability of the lender to take the assets of the borrower if the debt is not paid. Non-recourse debt favors the borrower, while recourse debt favors the lender. When a lender is given recourse rights in a borrowing arrangement, it means that the lender can pursue repayment ...
When a lender is given recourse rights in a borrowing arrangement, it means that the lender can pursue repayment of the debt from the borrower by seizing designated borrower assets. Thus, recourse debt refers to an agreement where the lender can attach borrower assets, while non-recourse debt refers to an agreement where the lender cannot do so ...
A lender is most able to impose a recourse debt agreement on a borrower when the borrower is unable to obtain financing elsewhere on better terms, and especially when the borrower is in difficult financial circumstances. Conversely, a borrower may be able to demand non-recourse debt terms if it can select from many lenders ...
Conversely, a borrower may be able to demand non-recourse debt terms if it can select from many lenders and has such excellent financial results and asset reserves that it can justify its demands.
Consequently, some borrowers are more willing to accept recourse terms in exchange for a reduced interest rate and/or other, more lenient borrowing terms. Alternatively, a lender may be willing to grant less credit under a non-recourse agreement, usually only up to the amount of any collateral posted against the note.
If the regarded owner does not provide credit support (e.g., a guarantee), the recourse liability of the disregarded entity is arguably, in substance, a nonrecourse liability of the regarded owner.
Generally, when an unrelated lender discharges the indebtedness of a borrower for an amount less than its face value , the borrower must recognize COD income equal to the difference. This was originally established as common law in Kirby Lumber Co. ,284 U.S. 1 (1931), and is codified under Sec. 61 (a) (12).
The lender's only remedy exists with respect to those specific assets owned by the disregarded entity, which for federal income tax purposes, are viewed as being owned by the regarded owner.
Irrespective of the form of a contractual obligation, the Commissioner may treat a partner as bearing the EROL with respect to a partnership liability to the extent that with respect to a contractual obligation:
An indemnity, reimbursement agreement, or similar arrangement will be recognized only if, before taking into account the indemnity, reimbursement agreement, or similar arrangement, the indemnitee’s or other benefited party’s payment obligation is recognized or would be recognized if such person were a partner or related person
For purposes of Treasury Regulation Section 1.752-3 (a) (3), the Partners agree that Non-Recourse Liabilities of the Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Non-Recourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests.
Non-Recourse Liabilities means liabilities of a Special Purpose Subsidiary where such liabilities are not the subject of any guarantee, indemnity or similar assurance from any other Group Member other than a Permitted Assurance and, except for recourse in respect of such Permitted Assurance, there is no other recourse for any payment in respect of such liabilities to the assets of any other Group Member other than recourse to the shares in such Special Purpose Subsidiary charged as security for such liabilities;.
Recourse Liabilities means the amount of liabilities owed by the Partnership (other than Nonrecourse Liabilities and liabilities to which Partner Nonrecourse Deductions are attributable in accordance with Section 1.704- (2) (i) of the Regulations).