If a corporation is thinly capitalized, all debt is reclassified as equity.

Name: If a corporation is thinly capitalized, all debt is reclassified as equity.
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Not all debt in a thinly capitalized corporation is automatically reclassified as equity. The reclassification depends on the jurisdiction's tax laws and accounting principles, and typically only occurs under specific conditions where the debt is deemed to not have the characteristics of genuine debt.

If a Corporation Is Thinly Capitalized, All Debt Is Reclassified