Minimum-Interest Rules

AAA

DEFINITION of 'Minimum-Interest Rules'

A law that requires that a minimum rate of interest be charged on any loan transaction between two parties. The minimum-interest rules mandate that even if no rate is charged by the lender, an arbitrary rate shall be automatically imposed upon the loan. The minimum-interest rules are at least partly intended to prevent excess gifting between taxpayers via intra-family loans with no or below-market interest rates.

INVESTOPEDIA EXPLAINS 'Minimum-Interest Rules'

Minimum-interest rules are fairly complex and have been subject to numerous changes and modifications. There are separate rules for personal and commercial loans and sales of property that are financed by the seller. For more information, consult Sections 7872, 1274 and 483 of the Internal Revenue Code.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Seller-Financed Sale

    A transaction where the seller also acts as the lender to the ...
  3. Interest

    1. The charge for the privilege of borrowing money, typically ...
  4. Commercial Loan

    A debt-based funding arrangement that a business can set up with ...
  5. Gift

    Property, money or assets that one person transfers to another ...
  6. Slander

    Slander is the act of harming one person’s reputation by telling ...
RELATED FAQS
  1. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  2. When capitalizing interest, will interest accrue while you are in a deferment?

    When capitalizing interest, interest accrues while a person is in a deferment of his loan. In the event of a deferment, the ... Read Full Answer >>
  3. Why is more interest paid over the life of a loan when it is capitalized?

    More interest is paid over the life of a loan when that interest is capitalized because the capitalized interest is added ... Read Full Answer >>
  4. What are some examples of simple interest loans?

    Two good examples of simple interest loans are simple interest car loans and the interest owed on lines of credit such as ... Read Full Answer >>
  5. How can I use the correlation coefficient to predict returns in the stock market?

    Simple interest is most commonly seen in short-term loans, such as those from payday lenders or pawn shops. You might see ... Read Full Answer >>
  6. What are some examples of debt instruments?

    Individuals, businesses and governments use common types of debt instruments, such as loans, bonds and debentures, to raise ... Read Full Answer >>
Related Articles
  1. Insurance

    Is Loan Protection Insurance Right For You?

    This coverage can keep you from defaulting on your loans when you're in financial trouble.
  2. Options & Futures

    Managing Interest Rate Risk

    Learn which tools you need to manage the risk that comes with changing rates.
  3. Taxes

    Tax-Efficient Wealth Transfer

    Taxpayers with large taxable estates were required to take steps to reduce them before 2011.
  4. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  5. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  6. Credit & Loans

    What's a Bridge Loan?

    A bridge loan is a loan that “bridges” a borrower over a temporary shortage in funds on hand.
  7. Investing

    Can You Be Sued for Negative Comments Online?

    It's important to understand the basics of libel law so you can avoid posting statements that might result in a lawsuit.
  8. Investing Basics

    Is Your Broker Churning Your Account?

    Is your broker churning your account to generate fees? Here's how to know and what recourse you have.
  9. Investing

    Why We Need Antitrust Laws

    A look at antitrust laws in the United States and the many anticompetitive practices they safeguard against.
  10. Trading Strategies

    IPO Flippers And The Companies Who Hate Them

    Learn how flipping activity affects an initial public offering.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!