R3 - Related Party Transactions

Question 1

RP basis rules = Gift tax rules

Answer 1

• Proceeds > relative basis; use relative basis to determine gain
• Relative purchase price > Proceeds > relative basis; no gain or loss; no gain or loss
• Relative purchase price > proceeds; use relative purchase price to determine loss

Question 2

Below-Market Loans

Answer 2

Below-market loans must report any foregone interest as interest income

Question 3

De Minimis Exception

Answer 3

Gift Loans < $10,000
Gift Loans < $100,000
Compensation and Corp SH < $10,000

Question 4

Foregone Interest Calc

Answer 4

Loan * AFR% - Loan * Actual Interest Rate