Outside Hubert I and Hubert II, there has been little discussion of negative capital accounts in the tax context and almost no discussion in the nontax context. Nontax law, however, is critically important. This report provides an integrated discussion of the application of tax and nontax law to negative capital accounts.
One of the challenges in writing this report is that it requires a discussion of both the at-risk rules of section 465 and the debt allocation rules of section 752. Complex issues involving sections 465 and 752 and their interaction are worthy of their own articles. Indeed, others have written those articles. In this report, I endeavor to stay focused on the negative capital account issues. So although I am forced to make forays into sections 465 and 752, I try to keep them restrained.
Walter D. Schwidetzky,
The Negative Capital Account Maze,
Available at: http://scholarworks.law.ubalt.edu/all_fac/1000