Recharacterization
/ˌriːˌkærɪktəraɪˈzeɪʃən/
Definitions
- (n.) The legal determination that the actual nature of a transaction differs from its formal characterization, often altering its treatment under law.
The court's recharacterization of the loan as equity changed the tax consequences for the parties involved.
- (n.) In bankruptcy law, the process of treating a purported debt as equity to adjust creditor priority and distributions.
Recharacterization in bankruptcy can convert a creditor's claim into an equity interest, affecting repayment.
Forms
- recharacterizations
Related terms
See also
Commentary
Recharacterization often hinges on substance-over-form analysis and is critical in contexts like tax, bankruptcy, and contract law to ensure legal treatment matches economic reality.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.