A reminder of the "Important Disclaimer: Answers and comments provided on
Google Answers are general information, and are not intended to substitute
for informed professional medical, psychiatric, psychological, tax, legal,
investment, accounting, or other professional advice."
You are thinking of the Applicable Federal Rates, or AFR, and here is the
Internal Revenue Service (IRS) page that provides those numbers.
"Each month, the IRS provides various prescribed rates for federal income
tax purposes. These rates, known as Applicable Federal Rates, or AFRs, are
regularly published as Revenue Rulings. The Revenue Rulings containing
current and recent-past AFRs are available here in Adobe PDF format."
The website of Walter & Shuffain, P.C., Certified Public Accountants, has
an excellent page of advice on what those AFR numbers mean, and other tips
on how to structure a loan so it is legitimate.
To lock in all these nice tax breaks, you want to ensure that the IRS will
treat your arrangement as a loan rather than as disguised equity. Here are
the guidelines to follow.
- You should receive a written promissory note from the corporation stating
that the company is making an unconditional promise to repay a sum certain
on demand, at a fixed maturity date, or in installments on specified dates.
- Preferably, the interest rate should be at least equal to the applicable
federal rate or AFR.
For example, say your corporation loaned you $20,000 in August of 2004. The
AFR for a short-term loan made that month (term up to three years) was 2.35%
with monthly compounding, the AFR was 3.93% for midterm loans (more than
three and up to nine years), and it was 5.09% for long-term loans (over nine
You really should read the above article in detail for other tips that might
prove useful. It has many very excellent points on this subject that should
probably be heeded.
As an example of the current AFR "Annual" numbers, here are the figures for
November of 2006.
If you need any clarification, please feel free to ask.
Google search on: minimum interest rate loan IRS
Google search on: IRS "applicable federal rate"
Looking Forward, denco-ga - Google Answers Researcher