Use of AFRs.

• Author: Bowman, Patricia T.
• Position: IRS issued applicable federal rates - Brief Article

Each month, the IRS issues applicable Federal rates (AFRs) and specified percentages of those rates. Table 1, on page 308, lists the various Code and regulation sections that require the use of one of these rates and a brief general description of those statutory and regulatory provisions.

Table 1: AM and Their Use Code or Regs. General 100% Sec. Description AFR 42(i)(2)(D) Low-income housing credit X 280G(d)(4) Golden parachute payments 411(c)(2)(C)(iii)(I) Minimum vesting standards 412(d)(1)(A) Waiver of minimum funding standard 412(m)(1)(A) Failure to pay quarterly contributions 453(I)(3)(B)(i)(III) Interest on time-shares and residential lots X 467(e)(4) Sale-leaseback 1.482-2(a)(2)(iii)(B)(1)(i) Related party debt- lower limit X 1.482-2(a)(2)(iii)(B)(1)(ii) Related party debt- upper limit 483(b)(2) Interest on deferred payments X 514(c)(9)(H)(ii)(III) Unrelated debt- financed income X 1.514(c)-2(d)(4)(ii) Permitted allocations 1.707-4(a)(3)(ii) Disguised property sales to partnership 860B(c)(1) Taxation of REMIC interest holders 860E(c)(2)(A)(ii) REMIC income 8601(d)(1)(A)(ii) FASIT gain recognition 1.861-9T(b)(3)(i) Allocation and apportionment of interest expense 1.897-1(d)(4) Taxation of foreign investments in U.S. real property interests 1258(b)(1) Capital gain recharacterization 1274(b)(2)(B) Debt issued for property X 1274(e)(1) Sale-leaseback 7520(a)(2) Valuation tables 1.7701(I)-2(e)(2) (proposed) Obligation-shifting transactions 7872(e) and (f) Below-market loans X Code or Regs. 110% 120% 130% 150% 175% Sec. AFR AFR AFR AFR AFR 42(i)(2)(D) 280G(d)(4) X 411(c)(2)(C)(iii)(I) X 412(d)(1)(A) X 412(m)(1)(A) X 453(I)(3)(B)(i)(III) 467(e)(4) X 1.482-2(a)(2)(iii)(B)(1)(i) 1.482-2(a)(2)(iii)(B)(1)(ii) X 483(b)(2) 514(c)(9)(H)(ii)(III) 1.514(c)-2(d)(4)(ii) X 1.707-4(a)(3)(ii) X 860B(c)(1) X 860E(c)(2)(A)(ii) X 8601(d)(1)(A)(ii) X 1.861-9T(b)(3)(i) X 1.897-1(d)(4) X 1258(b)(1) X 1274(b)(2)(B) 1274(e)(1) X 7520(a)(2) X 1.7701(I)-2(e)(2) (proposed) X 7872(e) and (f) Background

Before the Deficit Reduction Act of 1984 (DRA), a deferred-payment sale of property exempt from the original issue discount (OID) rules generally was subject to the unstated interest rules of Sec. 483. If the parties to the transaction failed to state a minimum "safe-harbor" rate of interest to be paid on the loan by the...