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Advisor ask: Stuart Memory — AFR promissory notes (Five Points + Mita-side $350K)

Advisor: Stuart Memory — Birmingham attorney; SBA Loan 7803 negotiation lead + AFR-loan paperwork drafter. Coordination with Pearce on §7872 imputed-interest + 1099-INT compliance. Date: 2026-05-10 (drafted; sending pending Austin's go-ahead — escalation email already drafted at todo/email-drafts/2026-05-09-stuart-memory-escalation.md) Deadline / why now: Both legs are real loans with §7872 imputed-interest compliance + 1099-INT issuance required. 2026-01-31 is the next 1099-INT deadline (for 2026 tax year — but the 2024 + 2025 1099-INTs may already be late depending on when interest started accruing). The longer the notes go unsigned, the more daylight between substance and form. Severity: Major — gates accounting/loan-register.csv rows AFR-FivePts + AFR-Mita going from [P] to [F]; gates 1099-INT compliance.

Facts we believe

Two parallel AFR loans, both from Austin's parents (Eugene + Jana Renfroe, joint-account-style funding) into the RFH stack:

Leg 1 — Five Points BHM (loan-register row AFR-FivePts): - Lender: Eugene + Jana Renfroe (parents, joint) - Path: parents → Austin → RFH → Five Points BHM - Principal: TBD (Austin to confirm) - Funding date: TBD (Austin to confirm) - Stated rate: TBD; should be at least the AFR at disbursement to avoid imputed-interest under §7872 - Payment structure: TBD (monthly amortizing? balloon? interest-only?) - Maturity: TBD - Promissory note status: Missing — Stuart Memory was looking for it Sept 2025 per accounting/advisor-decision-register.md - 1099-INT status: TBD — 2024 + 2025 may need to be issued retroactively if interest was accruing - Source: accounting/afr-loan-amortization-template.md

Leg 2 — Mita-side $350K (loan-register row AFR-Mita): - Lender: parents (per Brex API memo "JANA P RENFROE JOINT - FUND HOLDING CO") - Path: parents → Austin → RFH → GK - Principal: $350,000 USD - Funding date: 2025-07-23 (confirmed via Brex API wire-level mining; per accounting/intercompany-ledger.csv) - Stated rate: TBD — should be at least AFR at disbursement (July 2025) - Payment structure: TBD - Maturity: TBD - Promissory note status: Missing - 1099-INT status: TBD — for 2025 tax year (interest started accruing July 2025 if we're treating this as a real loan) - Source: accounting/loan-register.csv row AFR-Mita; accounting/mita-deep-dive.md § Open items #6 - Mirror leg: RFH → GK Loan #2 ¥50M @ 1% p.a. signed 2025-07-24 — that one IS signed (accounting/loan-register.csv row RFH-GK-Loan2)

Why this matters more than just bookkeeping: under IRC §7872, a below-AFR-rate loan from family members triggers imputed interest on the lender's return + a deemed gift to the borrower for the difference between the stated rate and the AFR. Without a written note specifying the rate, the IRS's default presumption is unfavorable. Real notes at AFR or higher avoid the imputed-interest mechanic and protect the gift-tax characterization.

Decision needed

Stuart Memory to (a) draft both promissory notes with terms that match the actual cash flows and intent, (b) get parents' signatures, © coordinate with Pearce on the 1099-INT issuance schedule (retroactive for 2024-2025 if applicable, plus going-forward 2026 onward).

Options

  • Option A — Draft both notes at AFR (period-of-disbursement), demand-payable, no fixed maturity. Simplest form; AFR (lowest applicable rate as of disbursement month/year) avoids imputed-interest issue. Demand-payable means parents can call the loan but practically they won't. Annual interest payments + 1099-INT issuance.
  • Option B — Draft both notes at AFR, fixed amortization schedule. More formal; matches accounting/afr-loan-amortization-template.md. Fixed monthly or quarterly principal+interest payments per the schedule.
  • Option C — Draft as gift-then-loan structure. Treat as gift up to the annual exclusion ($18K/donor/donee 2024; $19K 2025; $19K 2026 — could absorb most or all of the $350K Mita-side leg over 4-6 years from both parents). Beyond exclusion, the rest is real loan. Most flexible but most complex.

Option B — fixed amortization schedule at AFR. The template at accounting/afr-loan-amortization-template.md already exists; the script scripts/fpa/afr_amortization.py can produce the schedule. Cleanest paper trail; Pearce will be able to issue 1099-INTs on a predictable schedule; matches the substance ($350K Mita-side wire was a discrete event, not a series of contributions).

However — Pearce has the better view on whether the timing of the $350K wire (July 2025) plus retroactive papering creates any §7872 / §6018 (gift tax return) exposure that Option C might mitigate. Stuart Memory + Pearce should confer.

Xero / books impact

  • accounting/loan-register.csv rows AFR-FivePts + AFR-Mita move from [P] to [F] when notes are signed
  • accounting/afr-loan-amortization-template.md populated with actual terms → produces schedule
  • Xero books: 2210 / 2230 Note payable to E+J Renfroe (per accounting/accounting-policy.md §25 numbering); per-period interest-expense accruals + cash payments
  • 1099-INT issuance becomes a recurring January deliverable per tax/compliance-calendar.md
  • Confidence level today: [P] across both legs

Without signed notes, both legs are technically demand loans without stated rate — IRS presumption is imputed interest at the AFR + deemed gift for any below-AFR delta. Could trigger Form 709 (gift tax return) filing requirement for parents; could shift basis treatment for Five Points (if treated as capital contribution rather than loan, intercompany-stack treatment per §8 of accounting/accounting-policy.md collapses it to a single-taxpayer event); could create §385 debt-vs-equity recharacterization risk if scrutinized.

Getting the notes signed is the cheapest, simplest fix.

Source documents attached

  • accounting/loan-register.csv (rows AFR-FivePts + AFR-Mita + RFH-GK-Loan2)
  • accounting/afr-loan-amortization-template.md
  • scripts/fpa/afr_amortization.py
  • accounting/mita-deep-dive.md § Open items #6
  • accounting/intercompany-ledger.csv (2025-07-23 row for the $350K wire)
  • todo/email-drafts/2026-05-09-stuart-memory-escalation.md (escalation email)
  • accounting/advisor-decision-register.md Stuart Memory section

Open follow-ups for advisor

  • Coordinate with Pearce + Daisy on 1099-INT issuance schedule (retroactive for 2024 if Five Points leg interest was accruing then; for 2025 if Mita-side leg started July 2025; for 2026 onward going forward)
  • Confirm both legs use the same AFR convention (period-of-disbursement vs current-AFR — usually period-of-disbursement is right)
  • Five Points leg principal + funding date (Austin to provide from records; needed to populate the amortization schedule)
  • SBA Loan 7803 collection status (separate from AFR notes but adjacent in Stuart Memory's portfolio): post-Jan 2026 reminder. What's moved since "nothing to do right now" Oct 30 2025? Three rapid-fire SBA acceleration notices Sep 13 2025 — current status?
  • SBA "Parent" $1.2M loan — entity of record TBD per accounting/loan-register.csv row SBA-Parent-Loan
  • Reconcile complete SBA debt picture across multiple notes (per tax/2025-filing-prep.md — Pearce ask): Woolworth $1.257mm + separate $497,483 just-called-due + 1006 $150K (Austin not a guarantor on the $150K)

Decision register entry (post-engagement)

When notes are signed, log in accounting/advisor-decision-register.md Stuart Memory section with date / scope / Xero impact (loan-register rows go [F]). Update accounting/loan-register.csv rows. Update accounting/afr-loan-amortization-template.md with actual terms. Trigger 1099-INT entry creation in tax/compliance-calendar.md for the relevant tax years.