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Course Details

Interest - Tax Mini Course (Course Id 135)

QAS / Registry / EA
  Add to Cart 
Author : Danny C Santucci, JD
Course Length : Pages: 31 ||| Review Questions: 10 ||| Final Exam Questions: 10
CPE Credits : 2.0
IRS Credits : 2
Price : $17.95
Passing Score : 70%
Course Type: NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents
Technical Designation: Technical
Primary Subject-Field Of Study:

Taxes - Taxes for Course Id 135

Description :

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 are reviewed. Particular attention is given to imputed interest and original issue discount.

Usage Rank : 13182
Release : 2022
Version : 1.0
Prerequisites : General understanding of federal income taxation.
Experience Level : Overview
Additional Contents : Complete, no additional material needed.
Additional Links :
Advance Preparation : None.
Delivery Method : QAS Self Study
Intended Participants : Anyone needing Continuing Professional Education (CPE).
Revision Date : 28-Aug-2023
NASBA Course Declaration : Participants must complete the final examination within one year of purchase and with a minimum passing grade of 70% or better to receive CPE credit unless otherwise noted on the Course History page (i.e. California Ethics must score 90% or better). After logging in click on the Course History links on your My Courses page for the Begin date and Expire date for the Final Exam.
Approved Audience :

NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - 135

Keywords : Taxes, Interest, Tax, Mini, Course, cpe, cpa, online course
Learning Objectives :

As a result of studying the assigned materials, you should be able to meet the objectives listed below.


      At the start of the materials, participants should identify the following topics for study:

    * Indebtedness
    * Deductible interest & mortgage interest
    * Investment interest
    * Nondeductible interest
    * Personal interest & capitalized interest
    * At-risk rules
    * Passive activity limitations
    * Below-market interest rate loans
    * Imputed interest on sales
    * Original issue discount (OID)
Learning Objectives:

      After reading the materials, participants will be able to:
    1. Determine "interest" and select how much is tax deductible under 163 by:
      a. Identifying what constitutes bona fide debt considering economic substance and purpose and the differences that such debt has from installment sales, long-term & leveraged leases, and annuities;
      b. Specifying how transactions with family members and controlled corporations can recharacterize alleged indebtedness into gift or business equity naming the factors used in this recharacterization and;
      c. Recognizing incentives to use corporate debt instead of equity and the special treatment of failed equity investment under 1244.
    2. Identify deductible interest and special calculation concepts and procedures by:
      a. Recognizing the allocation of interest based on the debt's business or personal purpose specifying the application of any carryover rules;
      b. Determining net investment income including its impact on the deductibility of investment interest;
      c. Recognizing the special tax treatment given to student loans, margin accounts, and market discount bonds stating what happens to any disallowed interest expense; and
      d. Specifying the timing considerations in interest reporting including interest paid in advance.
3. Recognize nondeductible interest types and provisions that through restriction create nondeductible interest by:
    a. Identifying when interest is nondeductible personal interest under 163(h)(1);
    b. Determining 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. Specifying the treatment of certain commitment fees and service charges based on R.R. 67-297 and caselaw.
4. Identify interest under the cash or accrual method recognizing the special elections applicable to and treatment of carrying charges under 266, below-market loans, and imputed interest.
Course Contents :

Chapter 1 - Interest




Bona Fide Debt

Economic Substance

Business Purpose

Related Party Debt

Inter-Family Loans

Loans to Controlled Corporation


Debt v. Stock Factors

Debt v. Lease

Traditional Lease

Leveraged Leases

Debt v. Annuity

Deductible Interest

Business Interest

Mortgage Interest

Qualified Residence Interest - 163(h)(3)

Acquisition Debt Modified

Refinanced Acquisition Debt

Home Equity Debt Suspended

Form 1098

Prepayment Penalty


Exception for Points on Home

Seller Paid Points

Expenses to Obtain a Mortgage

Interest on Installment Purchases

Investment Interest

Investment Property

Limit on Deduction

Business vs. Investment Interest & Income

Net Investment Income

Investment Income

Capital Gain Inclusion Election

Childs Investment Income

Investment Expenses

Losses from Passive Activities


When to Deduct Investment Interest

Form 4952

Interest Paid In Advance

Interest on Margin Accounts

Interest on a Market Discount Bond

Disallowed Interest Expense

Deduction for Student Loan Interest - 221

Nondeductible Interest

Personal Interest - 163(h)(1)

Interest on Income Tax Owed


Capitalized Interest - 263A

Production Period

Traced Debt

Avoided Cost Debt

When Interest Is Paid or Incurred

Partnerships & S Corporations

Interest Related To Tax-Exempt Income - 265

Interest on Insurance Policy Loans - 264

Single Premium Life Insurance

Systematic Plan of Borrowing

Key Person Insurance

Deductibility of Premiums & Interest on Life Insurance

Existing Interest on Purchase

Commitment Fees & Service Charges

Corporate Acquisition Interest - 279

At-Risk Rules - 465

Loss Defined

Form 6198

Activities Covered by the At-Risk Rules

Amount At Risk

Borrowed Amounts

Related Persons

Subsequent Years

Amounts Not At Risk

Nonrecourse Financing

Other Loss Limiting Arrangements

Reductions of Amounts At Risk

Passive Activity Limitations - 469

Calculating Passive Loss

Categories of Income & Loss



Material Participation

Suspension of Disallowed Losses

Fully Taxable Disposition

Abandonment & Worthlessness

Related Party Transactions

Other Transfers

Transfer By Reason Of Death - 469(g)(2)

Transfer By Gift - 469(j)(6)

Installment Sale - 469(g)(3)

Ordering of Losses


Allocation of Suspended Losses

Rental Activity

Rental Activities of Real Estate Professionals

Working Interests in Oil & Gas

When to Deduct Interest

Cash Method

Prepaid Interest


Exception for Points on Home

Discounted Loans

Refunds of Interest

Accrual Method

Prepaid Interest

Tax Deficiency

Related Taxpayer - 267

Election to Capitalize Carrying Charges - 266

Below-Market Interest Rate Loans - 7872

Demand Loans (Gift or Nongift) - 7872(a)

Forgone Interest - 7872(e)(2)

Term Gift Loans - 7872(d)(2)

Nongift Term Loans - 7872(b)

Loans Subject To the Rules


Special Rule for Certain Gift Loans

Loans Not Subject To the Rules

Tax Avoidance Loans

Significant Effect on Federal Tax Liability

Loans to Qualified Continuing Care Facilities

Continuing Care Facility

Continuing Care Contract

Imputed Interest on Sales - 483 & 1271 through 1275

Applicable Federal Rate (AFR)

Effects of Unstated Interest

Selling Price & Contract Price

Rules for Imputing Interest

Test Rate of Interest

Relationship of 1274 & 483

Section 483

Total Unstated Interest

Transactions to Which Section 483 Rules Apply

Sale of a Farm

Sales with Total Payments of $250,000 Or Less

Land Sales between Related Parties

Exceptions to 483 Rules

Section 1274 Rules

Exceptions to 483 & 1274

Original Issue Discount (OID)

De Minimis OID

Form 1099-OID


Debt Instrument Bought At Premium

Exceptions to OID Rules

Debt Instruments Issued From 1955 to 5/28/69

Corporate Debt Instruments Issued From 5/28/69 to 7/2/82

Debt Instruments Issued From 7/2/82 to 1/1/85

Debt Instruments Issued After 12/31/84

Recomputation of OID on Form 1099-OID

Acquisition Premium

REMIC Regular Interests

Certificates of Deposit (CDs)

Interest Subject To Penalty for Early Withdrawal

Bearer Certificates Of Deposit

Market Discount Bonds



CPE Taxes Course: https://www.cpethink.com/tax-cpa-courses
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