---
title: "Build a below-market shareholder-loan issues table under section 7872"
url: "https://ailawframework.com/practice/taxation/build-a-shareholder-loan-and-trust-distribution-issues-table/united-states"
type: "task_jurisdiction_version"
site: "AI Law Framework"
id: "A26-T1-R11-US"
practice_area: "Taxation"
tier: "red"
lawyer_review: "required"
jurisdictions: ["US"]
last_reviewed: "2026-10-22"
---

# Build a below-market shareholder-loan issues table under section 7872

> Build a table of the § 7872 questions for each loan the lawyer lists, and leave the rate, the present value, and every conclusion blank. Do not draft the loan. Leave the trust-distribution column blank.

Canonical page: https://ailawframework.com/practice/taxation/build-a-shareholder-loan-and-trust-distribution-issues-table/united-states  
Last reviewed: 2026-10-22

Site index for agents: https://ailawframework.com/llms.txt

## Key facts

| Fact | Value |
| --- | --- |
| Practice area | [Taxation](https://ailawframework.com/practice/taxation.md) |
| Human involvement | Red: Lawyer writes; AI may check, clarify or collect data |
| How AI is used | Build a table of the § 7872 questions for each loan the lawyer lists, and leave the rate, the present value, and every conclusion blank. Do not draft the loan. Leave the trust-distribution column blank. |
| What the lawyer must review | Section 7872 applies, among other loans, to a below-market loan directly or indirectly between a corporation and any shareholder of that corporation. A demand loan is below-market if interest is payable at less than the applicable Federal rate. A term loan is below-market if the amount loaned, which is the amount the borrower received, exceeds the present value of all payments due under the loan. A demand loan is payable in full at any time on the demand of the lender. For purposes other than the applicable Federal rate, the term also includes a loan whose interest-arrangement benefits are not transferable and are conditioned on an individual's future performance of substantial services. To the extent regulations provide, it also includes a loan of indefinite maturity. Any other loan is a term loan. For a gift loan or a demand loan, forgone interest is treated as transferred from the lender to the borrower and retransferred by the borrower as interest. Unless regulations say otherwise, forgone interest for a calendar year is treated as transferred on the last day of that year. Forgone interest is the excess of the interest that would have been payable if interest had accrued at the applicable Federal rate and been payable annually on that day, over the interest payable on the loan and properly allocable to the period. A below-market loan to which subsection (a)(1) does not apply is treated under subsection (b). The lender is treated as transferring, on the date of the loan or, if later, the first day the section applies, and the borrower is treated as receiving, cash equal to the excess of the amount loaned over the present value of all payments the loan requires. That excess is original issue discount in addition to any other original issue discount. For a corporation-shareholder loan, the section does not apply on a day when the aggregate outstanding loans between that borrower and that lender do not exceed $10,000, unless one of the principal purposes of the interest arrangements is the avoidance of any Federal tax. A husband and wife are treated as one person. If the section applies to a term loan on any day, it continues to apply even though the de minimis paragraphs would otherwise take it out. For a gift loan, that continuation is only for purposes of chapter 12. The applicable Federal rate for a term loan is the rate under § 1274(d) in effect on the day the loan was made, compounded semiannually. For a demand loan it is the Federal short-term rate under § 1274(d) for the period being measured, compounded semiannually. Section 1274(d) was not opened. Do not write a percentage. Present value is determined as the Secretary's regulations provide, as of the date of the loan, using that rate as the discount rate. The section does not apply to a loan to which § 483, § 643(i), or § 1274 applies. Those sections were not opened. Trust-distribution rules were not opened, so that column stays blank apart from the § 643(i) cross-reference. You write every conclusion. This table is not a loan agreement. |
| Written for | United States |
| Applies to | [Build a shareholder-loan and trust-distribution issues table](https://ailawframework.com/practice/taxation/build-a-shareholder-loan-and-trust-distribution-issues-table.md) |

## Checking plan

- What the AI does: Build a table of the § 7872 questions for each loan the lawyer lists, and leave the rate, the present value, and every conclusion blank. Do not draft the loan. Leave the trust-distribution column blank.
- Basis: Checked against the linked sources on 22 October 2026. Confirm the current instrument before reliance.

## Notes

- The gift-loan dollar limits and the continuing-care exception were not used. Do not apply them to a shareholder loan from this table.
- Section 1274(d) supplies the rate. It was not opened. Do not insert a percentage.
- This is not a complying private-company loan. The statute opened here imputes interest on a below-market loan.

## Sources

- [26 U.S.C. § 7872 (treatment of loans with below-market interest rates)](https://www.law.cornell.edu/uscode/text/26/7872) (checked 2026-10-22)
- [IRS Office of Professional Responsibility, Issue Number 2026-19, Introductory guidelines for responsible AI use in federal tax practice](https://www.irs.gov/pub/opr-taxpros/issue-number-2026-19-introductory-guidelines-for-responsible-ai-use-in-federal-tax-practice.pdf) (checked 2026-10-22)

## Forms and precedents for this task

| Form or precedent | Kind | AI level | Summary |
| --- | --- | --- | --- |
| [Division 7A complying loan agreement (private company loan to a shareholder or associate), with minimum yearly repayment schedule](https://ailawframework.com/precedents/taxation/division-7a-complying-loan-agreement.md) | Agreement | Yellow | Written loan agreement for a private company lending to a shareholder or associate so the loan is not treated as a deemed dividend: parties, amount, term (7 years unsecured or 25 years secured),… |

Signed-in accounts can read the full text of each one.

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*