Revenue Ruling 2003-118

Rev. Rul. 2003-118
Rev. Rul. 2003-118, 2003-47 I.R.B. 1095, 2003-2 C.B. 1095
                       Internal Revenue Service (I.R.S.)
                                 Revenue Ruling
                  CPI ADJUSTMENT FOR BELOW-MARKET LOANS FOR 2004
                           Released: November 11, 2003
                          Published: November 24, 2003

 Section 7872.–Treatment of Loans With Below-Market Interest Rates

  CPI adjustment for below-market loans for 2004. The amount that section 7872(g) of the Code permits a taxpayer to lend to a qualified continuing care facility without incurring imputed interest is published and adjusted for inflation for years 1987-2004. Rev. Rul. 2002-78 supplemented and superseded.

  CPI adjustment for below-market loans for 2004. The amount that section 7872(g) of the Code permits a taxpayer to lend to a qualified continuing care facility without incurring imputed interest is published and adjusted for inflation for years 1987-2004. Rev. Rul. 2002-78 supplemented and superseded.

  This revenue ruling publishes the amount that s 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, s 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, s 7872(g)(1) applies only to the extent that the aggregate outstanding amount of any loan to which s 7872(g) applies (determined without regard to s 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 s 7872(g)(1) applies, does not exceed $90,000.

  Section 7872(g)(5) provides that, for loans made during any calendar year after 1986 to which s 7872(g)(1) applies, the $90,000 limit specified in  s 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 s 7872(g)(2) of the Code. The amount is increased by the inflation adjustment for the years 1987-2004.

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                              REV. RUL. 2003-118
                                    TABLE 1
                           Limit under s 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
              2001                                                     $144,100
              2002                                                     $148,800
              2003                                                     $151,000
              2004                                                     $154,500
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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. 2002-78, 2002-2 C.B. 915, is supplemented and superseded.

DRAFTING INFORMATION

  The author of this revenue ruling is Avital Grunhaus of the Office of the Associate Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling, please contact Mrs. Grunhaus at (202) 622-3930 (not a toll-free call).

 Rev. Rul. 2003-118, 2003-47 I.R.B. 1095, 2003-2 C.B. 1095

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November 11th, 2003 |