An estimated interest rate for a debt or debt instrument that is used rather than the rate stated in the debt agreement. It is not an explicit rate, but instead the rate inferred from the amount of interest that would have been paid in a given period.
For example, imputed interest on a loan is the interest on a loan that is based on the difference between the market interest rate and the actual interest paid, or would have been paid, on the loan at maturity.
Investors don’t pay tax on imputed interest every year.
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