Sign up for our weekly newsletter and get a free copy of the "2020 Coronavirus Tax Summary"
and "2021 Consolidated Appropriations Act Summary"
Interest & Debt - Mini CourseCode: 22-INT2
Add to Cart
Add to Cart
Course description and objectives:
This course focuses on tax issues affecting the treatment of interest and debt. It covers the definition of bona fide debt, the impact of related parties, the avoidance of equity and lease characterization, and deductible versus nondeductible interest factors. Sticky cross issues such as the impact of at-risk rules under §465, passive loss restrictions of §469, and below-market rate loans under §7278 are examined. In addition, accounting method treatment of interest, points, prepaid interest, and discounted loans are reviewed. Particular attention is given to imputed interest and original issue discount.
After reading the materials, participants will be able to:
1. Define “interest” and determine whether and how much is tax deductible by:
a. Describing what constitutes bona fide debt considering economic substance, purpose, and differences that such debt has from installment sales, long-term & leveraged leases, and annuities;
b. Explaining how transactions with family members and controlled corporations can recharacterize alleged indebtedness into gift or business equity pointing out the factors used in this recharacterization and;
c. Listing four incentives to use corporate debt instead of equity while contrasting the special treatment of failed equity investment under §1244.
2. Categorize deductible interest types and identify special calculation concepts and procedures by:
a. Allocating interest based on debt’s business or personal purpose pointing out the application of any carryover rules;
b. Determining net investment income demonstrating its impact on the deductibility of investment interest;
c. Explaining the special tax treatment given to student loans, margin accounts and market discount bonds noting what happens to any disallowed interest expense; and
d. Describing the timing considerations in interest reporting including interest paid in advance.
3. Categorize nondeductible interest types and identify provisions that through restriction create nondeductible interest by:
a. Determining whether interest is nondeductible personal interest under §163(h)(1);
b. Explaining the disallowance of interest related to tax-exempt income under §265, the life insurance interest restrictions of §264; the §465 at-risk limitations and application of the §469 passive loss rules; and
c. Analyzing the treatment of certain commitment fees and service charges based on R.R. 67-2897 and caselaw.
4. Deduct interest under the cash or accrual method noting the special elections applicable to and treatment of carrying charges under §266, below-market loans, and imputed interest.
Presentation Method: Self-Study
CPE credit: 2 Hours
Program Level: Update
Advance Preparation: None
Exam expiration date: Participants must submit exams for grading within one year from the date of purchase