Basic Federal Income Taxation: Deductions: Below Market Loans

This lesson guides users through the effects of below market loans on calculating income and/or deductions. Questions consider the application of Internal Revenue Code § 7872.

Learning Outcomes

On completion of the lesson, the student will be able to:

1. Identify the types of loans to which I.R.C. § 7872 may apply, including gift loans, compensation-related loans, and corporation-shareholder loans.
2. Explain the general federal income tax treatment of below-market gift loans.
3. Describe the exception for de minimis gift loans and the special limitation for gift loans that do not exceed $100,000.
4. Explain the general federal income tax treatment of below-market, demand loans that are compensation-related or between corporation and shareholder.