Video: Recourse vs. Nonrecourse Liabilities

In this lesson, Nick Palazzolo, CPA, breaks down the differences between recourse and nonrecourse liabilities, critical concepts that considerably impact a partner's tax and at-risk basis in partnerships. He illustrates with clear examples how recourse liabilities come with a personal risk, allowing creditors to pursue personal assets, whereas nonrecourse liabilities limit creditors to partnership assets only. Nick emphasizes the importance of understanding these liabilities as they affect a partner's ability to claim losses on their tax returns. The lesson offers a straightforward explanation of how these debts influence tax situations within partnerships and prepares you to recall this vital information, a key to mastering the concepts for practical application and examination success.