Thursday, April 14, 2011
Understanding the Risks of Transfer-Of-Title Stock Loans: IRS Rules Nonrecourse Stock Loans As Sales
Definition of Transfer-of-Title Nonrecourse Securities Loans. A nonrecourse, transfer-of-title securities-based loan (ToT) method exactly what it says: You, the title holder (owner) of your stocks or other securities are required to transfer ownership of your securities to a third party before you receive your loan proceeds. The loan is "nonrecourse" so that you may, in theory, simply walk away from your loan repayment obligations and owe nothing more if you default. Sounds excellent no doubt. Maybe also excellent. And it is: A nonrecourse, transfer-of-title securities loan structure requires that the securities'
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