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What Are The Taxes On An Interest-Free Loan To A Loved One?
Source:
forbes.com
- Dec 16, 2019
Larry Light: You want to be nice and helpful to your loved one. But what are the tax consequences of this arrangement?
Bruce Bell: Persons who make non-interest-bearing loans face various tax consequences. The borrower is treated as having made interest payments to the lender, computed based on IRS-prescribed interest rates in effect from time to time, known as the Applicable Federal Rate. These consequences concern loans between family members, an employer and an employee and a corporation and a shareholder.
Light: So this imputed interest rate, which I understand is around 2%, is phantom money, but the tax man treats it likes it’s real?
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Category: General Business
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