AFR Schedules

by | Mar 3, 2014 | Blog, Tax Planning

Below is a link to the Nichols Accounting Applicable Federal Rates (AFR) table for the current month.  The AFRs are published by the IRS for the purposes of testing imputed interest for below-market interest loans and debt-for-property transactions.

If your facts require the use of the “blended annual rate”, then that is located at the bottom of your schedule.  It is based on a simplified method of computing interest based on the blended annual rate (Prop. Reg. 1.7872-13(a)(1)).

a. This method is available if the constant principal amount was outstanding during all of a calendar year; and

b. In the case of a demand loan, which originated or increased during a semi-annual period, the minimum AFR is the lower of the federal short-term rate in effect for the semi-annual period, or the short-term rate in effect on the day that the load is made (Prop. Reg. 1.7872-3(b)(3)).

The IRS determines the federal short-term, mid-term, and long-term rates for every calendar month based on the average market yields of specified maturities. For a sale or exchange, the AFR is the lowest rate in effect for any month in the three-calendar-month period ending with the first calendar month in which there is a binding written contract (Reg.1.483-3(a)); 1.1274-4(a). The AFR is determined by the reference to the term of the debt instrument, including renewal and extension options.

The AFR schedule is in PDF format, so you’ll need Acrobat Reader, to view or print them.

Mar 2014 AFR