Tonya owns an interest in an activity (not real estate) that converted recourse financing to nonrecourse financing.
Recapture of previously allowed losses is required if Tonya's at-risk amount is reduced below zero as a result of the debt restructuring.

Question

Quizplus · Accepted Answer

When an activity converts from recourse to nonrecourse financing, the amount of debt that is considered at-risk decreases. If this decrease causes the at-risk amount to fall below zero, the taxpayer may be required to recapture previously allowed losses.

Tonya Owns an Interest in an Activity (Not Real Estate)