What does the term "nonrecourse deduction" mean?


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What does the term: nonrecourse deduction(s) mean?

In legal documents I have seen the term nonrecourse deduction(s) used as it pertains to taxation and other economic factors. It is not clear to me from the context what the term is meant to convey. For instance, from a Founders Agreement found on docracy:

The Company will allocate any item of nonrecourse deduction to the Founders equally; provided, that any Founder’s partner nonrecourse deductions for any fiscal year or other period will be specially allocated to the Founder who bears the economic risk of loss with respect to the nonrecourse debt to which such partner nonrecourse deductions are attributable. [...]

Legal Terminology

asked Jul 9 '14 at 14:14
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Sean Quinn
1 point

1 Answer


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From Investopedia.com:

A type of loan that is 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. This is one instance where the borrower does not have personal liability for the loan.

These types of projects are characterized by high capital expenditures, long loan periods and uncertain revenue streams. Analyzing them requires a sound knowledge of the underlying technical domain as well as financial modeling skills.

answered Jul 9 '14 at 15:54
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Patricia Wright
663 points

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Legal Terminology