If you borrow money from a family member at a below market interest rate for the down payment on a mortgage,the lender must pay income taxes on the ____ that would have been earned had the market interest rate been assessed.

Question

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The term used for interest that is not explicitly stated but is implied by the transaction is imputed interest. The lender must pay income taxes on the imputed interest that would have been earned had the market interest rate been assessed.

If You Borrow Money from a Family Member at a Below