The Treatment of Loans as Income


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question 1 of 3

When do loans become taxable income?

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1. What is the lifetime maximum amount of gifts that the IRS allows to be exempted?

2. Forgiven loans from which of the following lenders may be exempted from being turned into taxable income?

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About This Quiz & Worksheet

Use these questions to see what you know about loans as taxable income. You will be asked to explain how the IRS classifies different loans and income.

Quiz & Worksheet Goals

In this quiz/worksheet set you'll make sure you know about:

  • The term for a loan that has become taxable income
  • Tax consequences of loans
  • Ways to prevent loans from becoming taxable income

Skills Practiced

  • Critical thinking - apply relevant concepts to examine information about loans and taxation in a different light
  • Information recall - access the knowledge you've gained regarding the maximum legal gift limit imposed by the IRS
  • Knowledge application - use your knowledge to answer questions about when a loan becomes taxable income and what it is then called

Additional Learning

You can learn more about the federal tax implications of loans by reading the lesson titled The Treatment of Loans as Income. New information covered will include:

  • Reasons someone might try to falsify a sale as a loan
  • Single year gift restrictions
  • Common repayment term lengths for different types of loans