The article discusses the distinction between recourse and nonrecourse debt in the U.S. Code Sec. 752, 704 (b) and 1001 provides specific definitions on the liability allocation purposes of the debt. The law specifies that a borrower is not personally liable on nonrecourse debt. Code Sec. 1001 rules that the excess amount of a recourse debt over the fair market value could be treated as cancellation of debt (COD).