rr-00-56.pdf

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# Part I

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

Rev. Rul. 2000-56

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

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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 1987-2001.

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REV. RUL. 2000-56 TABLE 1 Limit under 7872 (g) (2)

Year

Amount

Before 1987

$ 90,000

1987

$ 92,200

1988

$ 94,800

1989

$ 98,800

1990

$103,500

1991

$108, 600

1992

$114,100

1993

$117,500

1994

$121,100

1995

$124, 300

1996

$127,800

1997

$131, 300

1998

$134,800

1999

$137,000

2000

$139,700

$144,111

Note:
These inflation adjustments were computed
using the All-Urban, Consumer Price Index
1982-1984 base, published by the Bureau of Labor
Statistics.

# EFFECT ON OTHER DOCUMENTS

Rev. Rul. 99-49, 1999-50 I.R.B. 667, is supplemented and
superseded.

## DRAFTING INFORMATION

The author of this revenue ruling is Courtney Shepardson
of the Office of Assistant Chief Counsel (Financial
Institutions and Products) . For further information regarding
this revenue ruling, contact Ms. Shepardson on (202) 622-3930
(not a toll-free call) .

2001

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