Interest 

Course Description:

This course focuses on tax issues affecting the treatment of interest and debt. It covers the definition of bona fide debt, the impact of related parties, the avoidance of equity and lease characterization, and deductible versus nondeductible interest factors. Sticky cross issues such as the impact of at-risk rules under §465, passive loss restrictions of §469, and below-market rate loans under §7278 are examined. In addition, accounting method treatment of interest, points, prepaid interest, and discounted loans are reviewed. Particular attention is given to imputed interest and original issue discount.

Learning Objectives:

Upon successful completion of this course, participants will be able to:

•    Determine "interest" and select how much is tax deductible under §163 by identifying what constitutes bona fide debt considering economic substance and purpose and the differences that such debt has from installment sales, long-term & leveraged leases, and annuities; Specifying how transactions with family members and controlled corporations can recharacterize alleged indebtedness into gift or business equity naming the factors used in this recharacterization; and Citing incentives to use corporate debt instead of equity noting the special treatment of failed equity investment under §1244.
•     Identify deductible interest noting special calculation concepts and procedures.
•    Recognize nondeductible interest types and provisions that through restriction create nondeductible interest.
•     Identify interest under the cash or accrual method of noting the special elections applicable to and treatment of carrying charged under §266, below-market loans, and imputed interest.