imputed interest rate(redirected from Imputed Interest Rates)
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.
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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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.