Muddy Debt-Equity Classification for Partners Leads to ‘Stupid Games'

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March 16 — In a corporation, the distinction between debt and equity is pretty clear, Steven Schneider, a partner at Goulston & Storrs PC, said.

“Debt is like Nirvana in the corporate environment,” Schneider told Bloomberg BNA March 13. “Because all of a sudden—deduction.”

In partnership contexts, the bar to debt isn't as high and the classifications aren't as clear, so taxpayers can find themselves with debt-like equity, Schneider wrote in an article, “Is Debt vs. Equity Different in a Partnership?” published this month.