What is Section 1274 of the Internal Revenue Code?

Section 1274(d) governs the determination of applicable Federal rates (AFRs) that are used for determining the imputed principal amount of obligations to which section 1274 applies, for computing total unstated interest on payments to which section 483 applies, and for other purposes.

What does the IRS consider a short-term loan?

Short-term AFR rate is charged on loans with a maturity period of three years or less, while the mid-term AFR rate is charged on a loan with a maturity period of between three years and nine years. The long-term AFR rates are applicable to loans with maturities of more than nine years.

What is adequate stated interest?

If a debt instrument has a single fixed rate of interest that is paid or compounded at least annually, and that rate is equal to or greater than the test rate, the debt instrument has adequate stated interest.

How do you impute interest on a loan?

Multiply the AFR by the outstanding principal balance of the note. This is the annual imputed interest on the loan. This step must be repeated based on the compounding frequency of the note. For example, it is performed once annually for an annually compounding note and 12 times annually for a monthly compounding note.

What is Internal Revenue Code 1274?

Internal Revenue Code 26 U.S.C. § 1274 – U.S. Code – Unannotated Title 26. Internal Revenue Code § 1274. Determination of issue price in the case of certain debt instruments issued for property (a) In general.

What is section 1274 of the Federal Reserve Act?

Section 1274.–Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property (Also Sections 42, 280G, 382, 467, 468, 482, 483, 1288, 7520, 7702, 7872.)

When does section 1274a apply to sales and exchanges?

‘ (1) In general. – Except as provided in paragraph (2), the amendments made by sections 101 and 102 (enacting section 1274A and amending this section and sections 280G and 483 of this title) shall apply to sales and exchanges after June 30, 1985, in taxable years ending after such date.

What is not included in section 1274?

For purposes of section 1274, property includes debt instruments and investment units, but does not include money, services, or the right to use property. For the treatment of certain obligations given in exchange for services or the use of property, see sections 404 and 467.