Applicable Federal Rates

Applicable Federal Rates

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Applicable Federal Rates

Applicable Federal Rates definition:  Applicable Federal Rates (AFR) are defined monthly by the IRS and based on the rates of Treasury securities, rather than retail lending rates.  With intra-family loans, the AFR is critical to determining if gift tax rules apply. If the interest rate of the intra-family loan is less than AFR (below market rates), then the loan is considered a gift for income tax purposes.

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