These rules also apply to a term loan that is treated as a demand loan
because of the requirement that the employee perform future services to receive the loan (Prop.
In any event, the Service, in a Revenue Ruling published in 1973, extended the holding of the Blackburn to gift demand loans
A split-dollar term loan is any loan that is not a demand loan
IRC Section 7872(e)(1) defines below-market loans; a demand loan
is a below-market loan if interest is payable on it at a rate less than the "applicable federal rate" in effect for the loan period.
For demand loans
, the AFR is the short-term AFR in effect for the period for which forgone interest is being calculated, compounded semiannually.
A term loan is defined as any loan which is not a demand loan
For demand loans
with principal amounts that fluctuate during the year, the minimum interest rate is based on a month-by-month computation using the short-term applicable federal rate issued for each month.
Some of the most common types of debt financing available to the entrepreneur include demand loans
, lines of credit, bridge loans, conditional sales purchases and floor financing.
as lender (the "Lender"), which amended the Demand Promissory Note (the "Demand Note") dated September 28, 2007, relating to demand loans
that may be advanced by the Lender from time to time in the principal amount of up to $3 million.
7872(a), for demand loans
, the lender has interest income (forgone interest) equal to the excess of (1) the interest that would have accrued on the loan using the AFR over (2) any interest actually paid on the loan.
Many owners of closely held businesses have fluctuating demand loans
to or from their businesses and accordingly use the short-term or demand-loan rate that is specified by the IRS.
The centre will consider three major types of loans - demand loans
, term loans and equity investments.