Final answer:
Yes, for a below-market gift loan without exceptions to the imputed interest rules, the lender is considered to have received interest income for taxation purposes, even with no actual payments made. This is part of tax regulations ensuring proper interest income reporting and taxation, and is linked to real interest rate considerations when inflation is factored in.
Step-by-step explanation:
In the context of below-market gift loans where the imputed interest rules apply and no exception is made, it's indeed true that the lender is deemed to have received interest income even if no actual interest payments were made. The U.S. Internal Revenue Service (IRS) requires the calculation of imputed interest for income tax purposes, to reflect the market rate of interest on the loan. This scenario ensures that taxes are paid on the interest that would have been paid or collected if the loan had been issued at the market rate of interest.
This tax policy relates to the broader economic principle that nominal interest rates can be misleading when viewed without the context of inflation. A nominal interest rate may look favorable, but the real interest rate, which adjusts the nominal rate for the effects of inflation, may not provide the same benefit, especially after taxes on the interest income are accounted for. In times of high inflation, even a positive nominal interest rate can result in a negative real interest rate, eroding the lender's purchasing power and leading to a loss after taxes are paid on the seemingly positive gain.