2.4.1 Basic Quiz -- Interest-Free Loans

Generally, with an interest-free loan to a charity, interest not collected is treated as a gift.

True False

With an interest-free loan, the donor is treated as having received the interest payment from the charity and the interest is thus taxable income to the donor.

True False

There is an exception from the general rule that allows a donor to give to charity an interest-free loan for up to $250,000 without any negative consequences to the donor.

True False

The $250,000 interest-free loan exception can only be used for one charity at a time.

True False

It is permissible for the charity to have an unlimited number of interest-free loans from its donors without any concerns.

True False

The most common interest-free note is a demand note.

True False

With a demand note, the charity must be given a certain amount of time to pay back the loan after the donor asks for repayment.

True False

A donor must receive repayment of the loan amount and cannot gift the loan amount to the charity.

True False

When a charity receives an interest-free loan, it must use the loan for the charity's exempt purpose and cannot use the money to simply invest for additional income.

True False

Donors are entitled to a charitable deduction equal to the loan amount for giving charity an interest-free loan.