Applicable Federal Rate

Applicable Federal Rate

Applicable Federal Rate means:
an interest rate determined monthly and based on the rate paid by the federal government on borrowed funds. An AFR is provided for short-term, mid-term, and long-term debt. If a seller-financed mortgage provides a rate that is less than the AFR, interest will be imputed at the AFR. Former IRC (check if this IRC provision is current here) § 1274(d).

See also other Tax Terms and Definitions in U.S.A.

below-market loan.

Description and Definition of Applicable Federal Rate

The Applicable Federal Rate is the interest rate fixed by the U.S. Treasury Department for determining imputed interest. If you are receiving or making payments for a loan or installment sale, but little or no interest is stated on the contract, the IRS assumes a rate of interest based on the published applicable federal rate.


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