CPI adjustment for below-market loans for 2006. The
amount that section 7872(g) of the Code permits a taxpayer to lend to a qualified
continuing care facility without incurring imputed interest is published and
adjusted for inflation for years 1987-2006. Rev. Rul. 2004-108 supplemented
and superseded.
This revenue ruling publishes the amount that § 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 generally treats loans bearing a below-market interest
rate as if they bore interest at the market rate.
Section 7872(g)(1) provides that, in general, § 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) provides that, in the case of loans made after October
11, 1985, and before 1987, § 7872(g)(1) applies only to the extent
that the aggregate outstanding amount of any loan to which § 7872(g)
applies (determined without regard to § 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 § 7872(g)(1) applies, does not exceed $90,000.
Section 7872(g)(5) provides that, for loans made during any calendar
year after 1986 to which § 7872(g)(1) applies, the $90,000 limit
specified in § 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 that calendar year.
Table 1 sets forth the amount specified in § 7872(g)(2) of
the Code. The amount is increased by the inflation adjustment for the years
1987-2006.
EFFECT ON OTHER DOCUMENTS
Rev. Rul. 2004-108, 2004-2 C.B. 853, is supplemented and superseded.
The author of this revenue ruling is David B. Silber of the Office of
the Associate Chief Counsel (Financial Institutions and Products). For further
information regarding this revenue ruling, please contact Mr. Silber at (202)
622-3930 (not a toll-free call).
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