"LoTax" <lotax[at]hotmail.com> wrote:

- quote -

OK - it is not a sale, it is a refinance. Would the correct
rate then be the Long Term AFR on the date the loan is made?
I just want to make sure the 110% ...130% rules don't apply!
Thank you for your reply.

-bill (from la-la land)

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

Your memory is right *but* you may also be out there in
La-La.... Who knows...?

IRC section 1274(d)(2) is what you're looking for. Here's
what it says:

(2) Lowest 3-month rate applicable to any sale or exchange
(A) In general
In the case of any sale or exchange, the applicable
Federal rate shall be the lowest 3-month rate.
(B) Lowest 3-month rate
For purposes of subparagraph (A), the term "lowest
3-month rate" means the lowest of the applicable
Federal rates in effect for any month in the
3-calendar-month period ending with the 1st calendar
month in which there is a binding contract in
writing for such sale or exchange.

However, you should note that this rule applies to "any sale
or exchange" and - IIRC - it doesn't apply to *loans* and
accordingly it may not apply to your situation, a loan to
your son.... Or are you selling him the house that he's
buying? Also, elsewhere in section 1274 there's about
twenty or thirty exceptions covering *other* things this
rule *doesn't* apply to.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

I am interested in making a 30 year mortgage loan to my son
and want to avoid imputed interest. I know to use the long
term AFR, secure the loan with the house to make it
deductible and document everything. I'm also aware of the
$10,000 and $100,000 exceptions, which won't apply.

My question is I thought somewhere I heard you did not have
to use the current month's rate. Rather you could chose from
the last 2 or 3 months rates and pick the lowest. I have
searched the web and can't find any references to this. Is
my memory right or am I just out there in La-La land.

-bill

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >