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. Gift

    Property, money or assets that one person transfers to another ...
  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. Seller-Financed Sale

    A transaction where the seller also acts as the lender to the ...
  6. Baked In The Cake

    Projections, expectations and other news items that are already ...
Related Articles
  1. Is Loan Protection Insurance Right For ...
    Insurance

    Is Loan Protection Insurance Right For ...

  2. Managing Interest Rate Risk
    Options & Futures

    Managing Interest Rate Risk

  3. Tax-Efficient Wealth Transfer
    Taxes

    Tax-Efficient Wealth Transfer

  4. Home-Equity Loans: The Costs
    Options & Futures

    Home-Equity Loans: The Costs

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center