A below-market loan (e.g., from an employer to an employee) is a common example of a transaction that generates taxable imputed income.

Question

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When a loan is offered at an interest rate below the market rate, the difference between the two rates is considered taxable imputed income for the borrower, as it is seen as an additional benefit or compensation provided by the lender. This applies to loans between employers and employees as well.

A Below-Market Loan (E