What deduction category does a personal loan for which the borrower is not liable fall under?

The correct deduction category is nonrecourse debt. Nonrecourse debt refers to a type of loan where the borrower is not personally liable for repayment, meaning that if the borrower defaults, the lender can only seek repayment from the collateral backing the loan rather than from the borrower's personal assets. In the context of tax deductions, this designation is important because only specific types of interest payments and associated expenses from nonrecourse debts may be deductible under certain tax provisions.

In contrast, recourse debt would imply personal liability, where the borrower can be held responsible for repayment beyond the collateral. Personal liability debt refers to debts that the individual is personally liable for, which would not apply here since the borrower in question is not liable. Asset-backed debt typically involves securing a loan with a specific asset, which does not directly relate to the borrower's liability status.

Overall, nonrecourse debt is the most appropriate classification in this scenario, as it highlights the lack of personal liability for the borrower.