Asked by Kevin Chaffins on Jun 09, 2024
Verified
A taxpayer must report in income imputed interest on a loan made below market interest rate.
Imputed Interest
Interest that the IRS assumes was paid or received on a below-market loan, even though no actual interest payments were made, to prevent tax avoidance through interest-free loans.
Below Market Interest Rate
An interest rate that is lower than the current market rate, often provided as an incentive or through a subsidy.
Taxpayer
An individual or entity that is obligated to make payments to a governmental authority based on income earned or transactions conducted.
- Understand the regulations for recognizing income when acquiring property or services, and accounting for imputed interest.
Verified Answer
MC
Mayra ChantoJun 16, 2024
Final Answer :
True
Explanation :
According to the IRS, a taxpayer must report imputed interest on a loan made below market interest rate as taxable income. This is because the IRS treats the forgone interest as a form of income, which must be reported on the taxpayer's tax return.
Learning Objectives
- Understand the regulations for recognizing income when acquiring property or services, and accounting for imputed interest.