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Simple English definitions for legal terms

recharacterization

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A quick definition of recharacterization:

Recharacterization is when a court decides that a loan from someone who is part of a company that is being liquidated should actually be considered a capital contribution. This means that the insider will only get part of the money left over after all the company's debts have been paid. The court looks at things like how much money was available at the beginning, if the company could have gotten loans from other sources, and how the loan was recorded in the company's records.

A more thorough explanation:

Definition: Recharacterization is a court's decision that an insider's loan to a business in liquidation should be treated as a capital contribution instead of a loan. This means that the insider will only receive a portion of the liquidation proceeds after all the business's debts have been paid off. The court considers factors such as the amount of initial capital, the entity's ability to obtain loans from outside sources, and past treatment of similar transactions by the insider.

Example: John is a shareholder in a company that is going through liquidation. He had given the company a loan of $100,000, which he expected to be repaid in full. However, the court recharacterized the loan as a capital contribution, meaning that John would only receive a portion of the liquidation proceeds after all the company's debts had been paid off. This decision was based on the fact that the company had little initial capital, had difficulty obtaining loans from outside sources, and had a history of receiving similar transactions from John.

This example illustrates how recharacterization can affect an insider's expectations of repayment and highlights the factors that a court considers when making this decision.

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medicine is a scam
join the ethically ambiguous legal field instead
Dkk
18:57
I want to meet an attorney that defends clients who run into flat earth problems. I want an attorney that knows and believes in flat earth theory.
19:05
i want a flat earther for president. i want a guy who posts on 4chan for president. i want someone who mogs for president.
Dkk
19:18
Exactly. My version of that awful poem.
Dkk
19:19
I can accept a president with maybe one or two of the poems traits hut good God, all of them??? No ty.
windyMagician
19:20
president who respects sex is crazy
windyMagician
19:20
we had bill clinton already
Dkk
19:21
Bill Clinton, first and last black president
windyMagician
19:23
I want to go running but my leg feels weird
windyMagician
19:23
it doesn't hurt its just tingly
Dkk
19:26
It needs more alcohol. You tingle when your nerves need watering.
19:27
try stretching it maybe to see what's up
windyMagician
19:27
stretches make me think it's just soreness
windyMagician
19:27
I'm sober lol
Dkk
19:38
Anyone else get the google notification that your LSD password has been compromised lol. LSD got hacked.
20:48
what.jpg @Dkk
CynicalOops
21:03
You think you just fell out of a coconut tree?
jackfrost11770
21:10
nope dk
CynicalOops
22:37
Calvinamala Harris
jackfrost11770
23:16
should i start using letterboxed again
Dkk
23:25
@jackfrost11770: if you want but like it aint for me
dk do u ever eat at bk
Dkk
23:48
@chickenburgahfart: I would do that in the Army if really desperate for food or if I had to work through lunch. One of the few fast food places I go to.
bk so slept on
Dkk
0:23
I will take In N Out everyday over it when I can though.
texaslawhopefully
1:22
In N Out is not only the best fast food place, but the prices too are fantastic
Dkk
1:27
Indeed, indeed.
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