imputed interest rate

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Imputed Interest Rate

The minimum interest rate that the government assumes is paid on a loan, even if the actual interest rate is lower. The U.S. government places an imputed interest rate on some loans to reduce tax avoidance by some organizations that make loans well below market interest rates. The IRS also applies imputed interest on some bonds so that tax is paid every year on the interest, even if the bondholder does not receive coupon payments until maturity.

imputed interest rate

A minimum market rate of interest assumed by the government for tax purposes regardless of the actual rate charged on a loan. The imputing of interest was included as part of the 1984 tax act in order to stop tax avoidance by people making loans at artificially low interest rates.
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It is impossible to reconstruct all past equity investments to formulate the past imputed interest rates, which leaves policymakers with two main options: they can accept that the accumulation of assets by many existing subsidiaries in low-tax jurisdictions would allow them to lower their imputed tax rates; or, alternatively, they can try to tax some of those previous gains through a rough approximation.
Since there is a market price at which risky Irish technology companies borrow, the imputed interest rate in this transaction could be determined.
If the Fed doesn't show up at the table, the price of bonds will likely drop, which will increase the imputed interest rates.