Determination of taxable income in specific situations., 26 CFR 1.482-2

Summary

Loans or advances — (1) Interest on bona fide indebtedness —

In general. Where one member of a group of controlled entities makes a loan or advance directly or indirectly to, or otherwise becomes a creditor of, another member of such group and either charges no interest, or charges interest at a rate which is not equal to an arm’s length rate of interest (as defined in paragraph (a)(2) of this section) with respect to such loan or advance, the district director may make appropriate allocations to reflect an arm’s length rate of interest for the use of such loan or advance.

Application of paragraph (a) of this section —

Interest on bona fide indebtedness. Paragraph (a) of this section applies only to determine the appropriateness of the rate of interest charged on the principal amount of a bona fide indebtedness between members of a group of controlled entities, including —

Loans or advances of money or other consideration (whether or not evidenced by a written instrument); ...