Internal Revenue Bulletin:  2005-49 

December 5, 2005 

Rev. Rul. 2005-75


CPI adjustment for below-market loans for 2006. 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 1987-2006. Rev. Rul. 2004-108 supplemented and superseded.

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 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 1987-2006.

Rev. Rul. 2005-75 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  
  2001 $144,100  
  2002 $148,800  
  2003 $151,000  
  2004 $154,500  
  2005 $158,100  
  2006 $163,300  
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. 2004-108, 2004-2 C.B. 853, is supplemented and superseded.

DRAFTING INFORMATION

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


More Internal Revenue Bulletins