Real Estate & Investing

Nonrecourse Debt

Nonrecourse debt is debt secured primarily by collateral where the borrower generally is not personally liable beyond the pledged property, subject to the governing documents and law.

Quick answer

Nonrecourse debt is debt secured primarily by collateral where the borrower generally is not personally liable beyond the pledged property, subject to the governing documents and law.

It matters because tax basis, loss limits, and foreclosure outcomes can differ from recourse financing.

Some investment-property financing is structured as nonrecourse debt tied mainly to the property itself.

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Plain-English Definition

What Nonrecourse Debt means

Nonrecourse debt is debt secured primarily by collateral where the borrower generally is not personally liable beyond the pledged property, subject to the governing documents and law.

Why it matters It matters because tax basis, loss limits, and foreclosure outcomes can differ from recourse financing.
Simple example Some investment-property financing is structured as nonrecourse debt tied mainly to the property itself.
Related Questions

Questions people ask about Nonrecourse Debt

What does Nonrecourse Debt mean?

Nonrecourse debt is debt secured primarily by collateral where the borrower generally is not personally liable beyond the pledged property, subject to the governing documents and law.

Why does Nonrecourse Debt matter?

It matters because tax basis, loss limits, and foreclosure outcomes can differ from recourse financing.

What is a simple example of Nonrecourse Debt?

Some investment-property financing is structured as nonrecourse debt tied mainly to the property itself.

When should I ask a CPA about Nonrecourse Debt?

Ask a CPA when the term affects property tax planning, rental activity, depreciation, basis, or gain on a sale.

How is Nonrecourse Debt different from Recourse Debt?

Nonrecourse Debt means Nonrecourse debt is debt secured primarily by collateral where the borrower generally is not personally liable beyond the pledged property, subject to the governing documents and law. Recourse Debt means Recourse debt is debt for which the borrower remains personally liable beyond the collateral in the event of default. The difference is that they apply to different tax, accounting, or business situations and should not be treated as interchangeable.

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