Tax Question-Imputed Interest

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Posted by Tom Henderson on August 13, 2002 at 08:52:14:

I should know the answer to this question, but I have been out of the busness for a long time and am not familiar with current IRS regs. I am going to purchase a small $10,000 note for $7,000. I have talked to the payor and he has agreed to double his payments if I cut the interest rate in half. I know what my tax ramlifications are, but what of the payor. When I was strong in the business, if at least 9% interest was not charged, the IRS would impute 10%. (Does that tell you how long I have been out of the business)
My accountant is out of town. Does anybody know at what point the IRS starts imputing interest. For example if I were to structure notes or sell a property and take back a note with 0% interest, what would be the tax consequences.

Thanks,
Tom Henderson

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