imputed interest rate

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.
Mentioned in ?
References in periodicals archive ?
Since there is a market price at which risky Irish technology companies borrow, the imputed interest rate in this transaction could be determined.
The imputed interest rate that they would have to pay would highlight their lower borrowing power.
Alternatively, if the certificates `were accorded an imputed interest rate for budget accounting, while the immediate effect would be to record a lower deficit, the unified balance of the U.
In accordance with the terms of the sale, the Company received cash of $100,000 and a long-term receivable, the fair value of which was $520,000 based on an imputed interest rate of 10.
Pro forma net income for the twelve months ended December 31, 2005 includes nonrecurring interest expense of $85,332 resulting from the amortization of the discount on the $3,413,265 promissory notes payable to the former Helpson shareholders, which discount was computed based upon an imputed interest rate of 10% per annum.
If the Fed doesn't show up at the table, the price of bonds will likely drop, which will increase the imputed interest rates.