Crown Loan

Demand loan by a high-income individual to a low-income relative, usually a child or elderly parent. This device was named for Chicago industrialist Harry Crown, who first used it. The money would be invested and the income would be taxable at the borrower's lower rates. For years, the crown loan provided a substantial tax benefit for all parties involved, since such loans could be made interest-free. In 1984 the U.S. Supreme Court ruled that such loans had to be made at the market rate of interest or be subject to gift taxes.

Demand loan to the children or parents of the lenders. This device was named for Chicago industrialist Harry Crown, who first used it. It puts the money in the lower tax category that applies to the loan recipients. For years, the Crown loan provided a substantial tax benefit for all parties involved, since such loans could be made interest-free. In 1984 the U.S. Supreme Court ruled that such loans had to be made at the market rate of interest or be subject to gift taxes.