Tufts and the Evolution of Debt-Discharge Theory

Does the dichotomy in treatment of recourse and nonrecourse debt make conceptual sense? If not, how did it come about and why does it remain? What are the practical consequences of the dichotomy? These are the questions with which this article deals.

And while the questions seem to be fairly narrow in scope, their resolutions require a broad consideration of fundamental principles of income taxation, including the treatment of gains and losses attributable to personal-use property. The article ultimately suggests the adoption of the bifurcated approach for both nonrecourse and recourse debt when debt is discharged upon the transfer of property worth less than the outstanding debt.