Imputed Interest Calculation

Resources for calculating Imputed Interest:

Imputed Interest Calculation – Calculating Imputed or Unstated Interest Under I.R.C. 1274

Investment Income and Expenses IRS Publicaton 550

Applicable imputed income amount.
1. Figure the amount of interest that would have accrued on your net investment in the conversion transaction for the period
ending on the earlier of:
a. The date you dispose of the position,
or
b. The date the transaction stops being a conversion transaction.
To figure this amount, use an interest rate equal to 120% of the “applicable rate,”
defined later.
2. Subtract from (1) the amount treated as ordinary income from any earlier disposition
or other termination of a position held as part of the same conversion transaction.

Applicable rate.

If the term of the conversion transaction is indefinite, the applicable rate is the federal short-term rate in effect under
section 6621(b) of the Internal Revenue Code during the period of the conversion transaction,
compounded daily.
In all other cases, the applicable rate is the “applicable federal rate” determined as if the
conversion transaction were a debt instrument and compounded semi-annually.

Schedule B (Form 1040) Interest and Ordinary Dividends – IRS Publication 1212 – Original Issue Discount (OID) Instruments

IRS Publication 561 – Determining the Value of Donated Property

M. Spik

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25 years of experience managing tax, accounting, payroll, and employment-related information portals. Editor of Accounting Portal since 2011.
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