REVENUE RULE 91-12

1991-1 C.B. 282, 1991-7 I.R.B. 22.

Internal Revenue Service
Revenue Ruling

CPI ADJUSTMENT FOR BELOW-MARKET LOANS 1991

Published: January 31, 1991

Section 7872. Treatment of Loans with Below-Market Interest Rates

CPI adjustment for below-market loans 1991. The amount that section 7872(g) of the Code permits a taxpayer to lend to a qualifying continuing care facility without incurring imputed interest is published and adjusted for inflation for years 1987-1991.

Rev. Rul. 89-129 supplemented and superseded.

This revenue ruling publishes the amount that section 7872(g) of the Internal Revenue Code permits a taxpayer to lend to a qualifying continuing care facility without incurring imputed interest. The amount is adjusted for inflation for the years after 1986.

Section 7872 of the Code generally treats loans bearing a below- market interest rate as if they bear interest at the market rate.

Section 7872(g)(1) of the Code provides that, in general, section 7872 does not apply for any calendar year to any below-market loan made by a lender to a qualified continuing care facility pursuant to a continuing care contract if the lender (or the lender's spouse) attains age 65 before the close of the year.

Section 7872(g)(2) of the Code provides that, in the case of loans made after October 11, 1985, and before 1987, section 7872(g)(1) applies only to the extent that the aggregate outstanding amount of any loan to which section 7872(g) applies (determined without regard to section 7872(g)(2)), when added to the aggregate outstanding amount of all other previous loans between the lender (or the lender's spouse) and any qualified continuing care facility to which section 7872(g)(1) applies, does not exceed $90,000.

Section 7872(g)(5) of the Code provides that, for loans made during any calendar year after 1986 to which section 7872(g)(1) applies, the $90,000 limit specified in section 7872(g)(2) is increased by an inflation adjustment. The inflation adjustment for any calendar year is the percentage (if any) by which the Consumer Price Index (CPI) for the preceding calendar year exceeds the CPI for calendar year 1985. Section 7872(g)(5) states that the CPI for any calendar year is the average of the CPI as of the close of the 12- month period ending on September 30 of such calendar year.

Rev. Rul. 89-129, 1989-2 C.B. 277, publishes the amount specified in section 7878(g)(2) of the Code, increased by the inflation adjustment, for the years 1987-90.

Table 1 sets forth the amount specified in section 7872(g)(2) of the Code. The amount is increased by the inflation adjustment for the years 1987-91.

REV. RUL. 91-12 TABLE 1

EFFECT ON OTHER DOCUMENTS

Rev. Rul. 89-129, 1989-2 C.B. 277, is supplemented and superseded.

DRAFTING INFORMATION

The author of this revenue ruling is Frederick S. Campbell-Mohn of the Office of Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling, contact Mr. Campbell-Mohn on (202) 566-3294 (not a toll-free call).

Rev. Rul. 91-12, 1991-1 C.B. 282, 1991-7 I.R.B. 22.