Course Information

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, the accounting method treatment of interest, points, prepaid interest, and discounted loans is reviewed. Particular attention is given to imputed interest and original issue discount.

1. Determine “interest” and select how much is tax deductible under §163 by recognizing incentives to use corporate debt instead of equity and the special treatment of failed equity investment under §1244 and identifying bona fide debt from installment sales.
2. Identify deductible interest and related special calculation concepts and determine net investment income, including its impact on the deductibility of investment interest.
3. Recognize when interest is nondeductible personal interest under §163(h)(1) and determining the disallowance of interest related to the §465 at-risk limitations and application of the §469 passive loss rules
4. Identify interest under the cash or accrual method, recognizing the special elections applicable and the treatment of §7872 loans.