Six months after issuing controversial proposed regulations under Sec. 385 that would recharacterize certain transactions between related parties that are ostensibly debt as equity—curbing the practice of “earnings stripping”—the IRS issued final and temporary regulations (T.D. 9790) that expand on and modify the proposed rules. READ MORE NOW
If no interest or an unrealistic amount of interest is charged in a salve involving certain kinds of deferred payments, then the transaction will be treated as if the realistic rate of interest had been used. The difference between the realistic interest and the interest actually used is referred to as imputed interest.