The purpose of the tax rules that apply to below-market loans between family members is to:
A)Discourage loans between related parties.
B)Prevent shifting of income among family members.
C)Prevent gifts from being disguised as bad debt expenses.
D)Prevent gift tax avoidance.
E)None of these is true.

Question

Quizplus · Accepted Answer

The tax rules for below-market loans between family members aim to prevent income shifting, where a higher-income family member could lend money to a lower-income family member at a low or zero interest rate, thereby reducing the overall tax liability of the family unit.

The Purpose of the Tax Rules That Apply to Below-Market