Debt & Interest: Allocation, Installment Sales, & Tax Treatment
This mini-course brings the practitioner information on tax issues affecting debt and interest deductibility and tax treatment. The various types of interest and their required allocation are explored and reviewed. For the economically troubled client, special attention is devoted to debt cancellation, repossession, discounts, and foreclosure. The program also discusses installment sales, taxable interest, and bad debts.
Course Information
Course No. M330
Format: Online pdf (68 pages). Printed book available.
Instructional Delivery Method: QAS Self-Study
Prerequisites: General understanding of federal income taxation.
Advance Preparation:Â None
Level: Overview
CPE Credit: 2.5 hrs.
Field of Study: Taxes: Technical
Course expiration:Â Â You have one year from date of purchase to complete the course.
Course Revision Date: July 2026
Objectives
Course Topics:
* Deductible interest & debt
* Nondeductible interest
* Below-market interest rate loans
* Unstated or imputed interest on sales
* Original issue discount (OID)
* Allocation of deductible interest
* Taxable interest
* Installment sales
* Debt cancellation & foreclosure
* Bad debts
Learning Objectives:
- Determine whether the various types of interest are tax deductible or nondeductible and cite the imputed interest rules in the context of debt instruments.
- Identify the interest allocation rules and the allocation period for a loan and recognize the allocation of loan proceeds that are deposited in an account.
- Determine the tax treatment of interest that is earned on such items as income on frozen deposits and U.S. Savings Bonds.
- Recognize what constitutes the installment method, specify the parts of each payment on an installment sale, and cite the consequences of pledging installment obligations.
- Identify exceptions to the general income inclusion rule and specify bad debt categories, specifying the impact of nonbusiness bad debt recovery.
