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Barter is taxable. So are gifts. What about lending objects (possibly for an indefinite amount of time)?

If it is not taxable, would that constitute a loophole for the taxation of gifts and barter?

If not, why? Perhaps there is some restriction on how ownership works in that case?

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    Laws and tax regulations vary around the world. If you would like a specific answer to your question then please add the relevant jurisdiction tag.
    – user35069
    Apr 6, 2022 at 18:50
  • @Rick I'm really interested in any jurisdiction where the question is applicable. But for concreteness, I added a tag. Apr 6, 2022 at 19:34
  • It would seem that the value and duration would be key factors. E.g. if you loaned your neighbor your lawnmower for 20 minutes because his ran out of gas would a reasonable person believe that short term benefit to be taxable? If you loaned him $100,000 at 0% interest and no schedule for repayment would a reasonable person perceive that as a gift tax dodge? Same thing goes for barters... Apr 8, 2022 at 3:57

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Under U.S. law, a no interest loan is treated as a loan for a statutorily determined fair market value interest loan, called the Applicable Federal Rate or AFR described in 26 U.S.C. § 1274(d) (in the case of money or the equivalent) which is called imputed interest, coupled with a gift from the person making the loan to the borrower, in the form of forgiveness of the implied in law interest on the loan, which is a gift for gift tax purposes.

There are several exceptions to this general rule, basically targeted at ignoring trade creditor terms (like paying 30 days net for a purchase), and small transactions.

In the case of payment-free loans tangible real or personal property, the fair market rental value of the loaned property can be treated as a gift for gift tax purposes.

Again, this would rarely be applied in practice in the case of small loans (you let your friend use a pencil or a lawn mower for a month), but will often be used in economically important transactions when there is already an audit in progress (e.g. use of a very expensive yacht or vacation home).

Usually receipt of loan proceeds is not taxable income, and usually, repayment of loan principal is not a deductible expense, but I believe that there are some obscure exceptions to that rule that amount of substance over form determinations.

Also, it is possible for the IRS to determine that while the parties have called something a loan with an indefinite time of return or repayment, that it is really just an outright gift and that the loan characterization is just a sham.

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