A bill to amend the Internal Revenue Code of 1954 to make permanent the rules relating to imputed interest and assumption of loans, and for other purposes.

Summary

Amends the Internal Revenue Code to establish an applicable test rate of nine percent for determining whether there is imputed interest in the case of seller-financed property. Permits a lower test interest rate of 80 percent of the Treasury rate where such rates are lower than the nine percent test rate. Provides for a blended test rate for instances where the loan amount exceeds $2,000,000. Authorizes the imputation of interest in seller-financed property sales of $2,000,000 or less of ten percent or 100 percent of the Federal Treasury rate, whichever is less, where the test interest rates have not been met. Allows for a blended imputed interest rate where the debt amount exceeds $2,000,000. Requires that all loan amounts from a single transaction or series of related transactions be aggregated for purposes of determining the loan amount. Prohibits the application of the imputed interest rules enacted in the 1984 Tax Reform Act in cases of loan assumptions. Repeals the provisions of the Code limiting the amount of interest expense a purchaser of personal use property may deduct for tax purposes. Provides that the imputed interest rules do not apply in the case of sales or exchanges of property used in the active business of farming where the borrowed amount does not exceed $2,000,000. Requires the interest on the obligation issued in connection with such sale or exchange to be taken into account by both buyer and seller on the cash receipts and disbursement method of accounting.

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1 official file

• Introduced in Senate

  summary · EN · 22 January 1985

  Open at official source

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