In the case of a below-market gift loan for which there is no exception to the imputed interest rules, the lender is deemed to have received interest income even though no interest is charged and collected.

Question

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When a lender offers a below-market gift loan and there is no exception to the imputed interest rules, the lender is deemed to have received interest income even though no interest is charged and collected. This is because the IRS assumes that the lender would have received interest if the loan were at market rates, and therefore imputes that interest income to the lender.

In the Case of a Below-Market Gift Loan for Which