Nonrecourse debt is typically used to finance commercial real estate, shipping, or other projects with high capital expenditures, long loan periods, and uncertain revenue streams. It is also commonly used for stock loans and other securities-collateralized lending structures.
Since most commercial real estate is owned in a partnership structure or similar tax pass-through , nonrecourse borrowing gives the real estate owner the tax benefits of a tax-pass-through partnership structure that is, loss pass-through and no double taxation , and simultaneously limits personal liability to the value of the investment. The nonrecourse loan was issued with Bear Stearns's less liquid assets as collateral, meaning that the Federal Reserve will absorb the loss should the value of those assets be below their collateralized value.
The legal financing industry provides nonrecourse financial products used to provide financial assistance to plaintiffs involved in a contingency -based lawsuit like a car accident. The funds are provided to the consumer on the potential settlement amount. This money is true nonrecourse funding, if the case is lost, one does not owe the company funding the lawsuit anything. This is a purchase of an asset and not a loan.
No Recourse Sample Clauses
Nonrecourse debt is usually carried on a debtor company's balance sheet as a liability, and the collateral is carried as an asset. Federal income tax purposes , the interaction among the concepts of 1 the "amount realized" upon a disposition, 2 the amount of nonrecourse debt, and 3 the amount of adjusted basis in the property is fairly complex. The tax consequences of a disposition depend on whether the taxpayer acquired the property with the nonrecourse debt already attached, or whether the taxpayer took out the nonrecourse debt after acquisition of the property, and the relative relationships between fair market value and purchase price and disposition price.
Upon a sale or other disposition of property under U.
No Recourse to Public Funds Team
Generally, the amount realized is the amount of cash and other consideration received by the taxpayer. The amount of any loan forgiven or discharged is generally part of that consideration. The adjusted basis is the sum of the following:. If the amount realized exceeds the amount of adjusted basis, the taxpayer has realized a gain at the time of disposition.
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If the adjusted basis exceeds the amount realized, a loss has been incurred. Assuming the same facts except that the debt is nonrecourse, the result would be quite different. The taxpayer would realize zero taxable ordinary income from the discharge of debt. At the sale, foreclosure or other disposition, nonrecourse debt incurred as part of the financing of the acquisition, and money extracted from an investment by mortgaging out, are treated the same: Nonrecourse debt that is in place at the time of acquisition of the property is included in basis, Crane v.
Commissioner , [11] subsequent borrowing is not.
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From Wikipedia, the free encyclopedia. Retrieved 15 November Both words mean "to happen again," but one suggests frequent or periodic repetition. See more words from the same century. More Definitions for recourse. See the full definition for recourse in the English Language Learners Dictionary. Under Article 3 of the Uniform Commercial Code, the phrase without recourse on a negotiable instrument limits the liability of the endorser or drawer.
If an endorsement states that it is made without recourse, the endorser is not liable to pay, subject to various conditions, if the instrument is dishonored. Similarly, if a draft states that it is drawn without recourse, the drawer is not liable to pay, subject to various conditions, if the draft is dishonored, provided that it is not a check.
Words that rhyme with recourse. Translation of recourse for Spanish Speakers. Translation of recourse for Arabic Speakers. What made you want to look up recourse? Please tell us where you read or heard it including the quote, if possible. Test Your Knowledge - and learn some interesting things along the way. Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!
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Nonrecourse debt
How to use a word that literally drives some people nuts. The awkward case of 'his or her'. Identify the word pairs with a common ancestor. Test your vocabulary with our question quiz! Synonyms for recourse Synonyms expedient , resort , resource Visit the Thesaurus for More. Examples of recourse in a Sentence The dispute was settled without recourse to law.