Below-market loans and original issue discount (OID) rules introduce complex tax consequences that frequently arise in family lending, shareholder transactions, and business financing arrangements. When loans do not bear adequate stated interest, the Internal Revenue Code may recharacterize the transaction, resulting in deemed interest income, deductible interest expense, or gift implications. This course provides tax and accounting professionals with a practical framework for identifying below-market loans and applying OID rules accurately.
Led by Susan Harper, Certified Fraud Examiner and retired IRS Internal Revenue Agent, this course explores IRC §7872 and the treatment of below-market loans, including applicable federal rate (AFR) comparisons, imputed interest calculations, and statutory exceptions. Participants will also examine original issue discount concepts applicable to both short-term obligations and long-term debt instruments, along with reporting requirements and compliance considerations. Through real-world scenarios and examples, attendees gain actionable guidance to help clients avoid unintended tax consequences and reporting errors.
Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2029 to receive credits. NOTE: Go to My Professional Profile in your CCH CPELink account settings to ensure your name, and PTIN number; matches your PTIN card
Publication Date: August 2026
Designed For
This course is designed for professionals who advise clients on loans, financing arrangements, and debt instrument reporting.
Topics Covered
- Overview of below-market loan rules
- Applicable Federal Rates and imputed interest calculations
- Common below-market loan scenarios and exceptions
- Tax consequences of imputed interest
- Original issue discount fundamentals
- Short-term obligations redeemed at maturity
- Long-term debt instruments and OID accrual
- OID reporting and compliance considerations
Learning Objectives
- Identify the key principles governing below-market loans under IRC §7872
- Distinguish common situations and statutory exceptions involving below-market loans
- Calculate and apply the tax treatment of imputed interest
- Define original issue discount and recognize when OID rules apply
- Differentiate between short-term obligations and long-term debt instruments subject to OID
- Apply proper reporting requirements for original issue discount
Level
Intermediate
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
Basic familiarity with debt instruments.
Advance Preparation
None
Instructor
Susan Harper
Susan Harper, CFE, is a veteran tax authority, credentialed Certified Fraud Examiner, and educator who dedicated nearly four decades to federal tax administration and compliance. She began her distinguished career with the Internal Revenue Service (IRS) in 1988 as an Internal Revenue Agent. Over the next 37 years, she became a foundational figure in the agency's specialized enforcement and technical analytics initiatives.
In 2002, Ms. Harper was selected to join the IRS’s very first Abusive Tax Avoidance Transaction group spearheading complex investigations into high-level tax evasion schemes. Building on this specialized background, she transitioned in 2008 to the Office of Fraud Enforcement, serving for 13 years as a Fraud Technical Advisor. In this critical role, she leveraged her forensic expertise to provide advanced technical guidance on high-risk, fraudulent tax compliance issues nationwide.
Driven by a passion for innovation, Ms. Harper joined the Research, Applied Analytics, & Statistics (RAAS) division in 2021 to continue developing a cutting-edge strategic research tool for frontline compliance employees. Her technical prowess and strategic vision quickly elevated her to the role of Technical Advisor to the Chief of RAAS, and ultimately, Technical Advisor to the IRS’s Chief Operating Officer.
Ms. Harper officially retired from federal service in September 2025, leaving behind a legacy of innovation and enhanced financial enforcement.
Beyond her investigative and strategic achievements, Ms. Harper is a deeply committed educator. Since 2000, she has been sharing her vast knowledge by instructing federal income tax seminars and, more recently, interactive webinars. She thrives on the dynamic interaction with her students and looks forward to shaping the next generation of tax and fraud professionals through teaching for many years to come.