imputed interest

Imputed interest

Used in accounting to refer to interest that has effectively been paid to a bondholder, even though no money has actually been paid.

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

Interest on an investment that is assumed for certain purposes to be paid even though no interest payment is physically received by the investor. For example, the Internal Revenue Service considers annual accretion on a zero-coupon corporate or a zero-coupon Treasury bond to be imputed interest for tax purposes even though investors holding these bonds receive no annual interest payments from the issuers.

Imputed interest.

Imputed interest is interest you are assumed to have collected even if that interest was not paid.

For example, you pay income tax on the imputed interest of a zero-coupon bond you hold in a taxable account even though the interest is not paid until the bond matures.

Similarly, you may be required to pay income tax on imputed interest if you make an interest-free loan, even if that loan is to your children or another member of your family. The government's position, in this case, is that you should have charged interest even though you didn't do so.

imputed interest

A common term for the IRS expression “unstated interest”or sometimes “original issue discount.”It applies to the situation in which a promissory note calls for no interest or insufficient interest under the circumstances.In an audit,the IRS will calculate an interest rate,impute that to the transaction, and declare each year's imputed interest as additional income to the lender, on which the lender must pay income taxes, penalties, and interest. (The rules are found at 26 U.S.C. §1273,1274 and 483.)

Imputed Interest (Unstated Interest)

In the case of certain long-term sales of property, the IRS has the authority to convert some of the gain from the sale into interest income if the contract does not provide for a minimum rate of interest to be paid by the purchaser. Such converted interest is called imputed interest.
References in periodicals archive ?
The facility represents a promissory note with an imputed interest rate of 4%.
The imputed interest is deemed paid by the shareholder to the corporation.
04 per common share, which after imputed interest resulted in a net loss for the quarter of USD47,000 or USD0.
However, with intrafamily aggregate sales of land of not more than $500,000 during a calendar year, the imputed interest rate would be the lower of the applicable federal rate or 6 percent.
The benefit, called imputed interest income, doesn't have to be paid to the lender by the borrower, but the borrower does have to pay income tax on the benefit.
Adding imputed interest earnings, the stock of Africa's capital flight stood at $274bn, i.
Convert the plan to a loan (the amount of the loan is the cumulative premiums paid by the employer and the employee is taxed on the imputed interest on the loans).
Thus, the employer includes the imputed interest in gross income, but has an offsetting deduction for the imputed transfer to the employee.
A provision that allows payment at some time in the future can be considered a below-market loan with the imputed interest considered a gift.
Under these circumstances, the notice treats employer premium payments as below-market-rate loans that must carry imputed interest to the employee.
These carry little or no threat of imputed interest by the IRS to the consumer.
Furthermore, unless the agreement provides for adequate interest on rent (which rarely occurs), a section 467 loan will be imputed, which will produce imputed interest income and deductions to the parties and, hence, may cause significant differences between the parties' expected and actual tax results in respect of the timing, amount, and character of income and deductions.