AFR Loan Amortization Schedule — Template¶
Loan: Austin Renfroe's parents → Five Points BHM LLC (funding for ServisFirst Bank note purchase that initiated the foreclosure on 1006 20th St S)
Status: TEMPLATE — awaiting Austin to populate the loan facts. Once populated, this becomes the authoritative amortization record on file.
Purpose: 1. Document the AFR intrafamily loan for §7872 compliance (avoids imputed-interest treatment) 2. Track principal vs. interest over the life of the loan 3. Support 1099-INT issuance to lenders each year 4. Feed Xero account 2240 (AFR loan payable — Austin's parents) and the corresponding interest expense line 5. Defend the bona fide intrafamily-loan character if IRS scrutinizes
Related files:
- legal/advisory-contract-gaps.md §3 — the gap this addresses
- tax/2025-filing-prep.md Q12 — Pearce's parallel item
- context/entities.md — Five Points BHM / 1006 story
- tax/advisory-tax-benefit-areas.md §E6 — §267 interest deductibility guardrails
Written (template): 2026-04-20. Not tax or legal advice.
Section 1 — Loan facts (to be populated)¶
Austin needs to fill each of these. Gaps prevent the amortization schedule from computing.
| Field | Value | Source / How to find |
|---|---|---|
| Lender(s) | [Austin's parents — full legal names] | Austin |
| Lender addresses | [needed for 1099-INT] | Austin |
| Lender SSN / TIN | [needed for 1099-INT] | Austin; parents must provide |
| Borrower | Five Points BHM LLC | — |
| Borrower EIN | [needed for 1099-INT issuance] | Five Points formation docs |
| Original principal | $[principal amount USD] | Austin / original promissory note if exists |
| Loan funding date | [date funds disbursed to Five Points] | Check Austin parents' bank statement vs. Five Points' initial funding; source-data/brex/ |
| Original stated interest rate | [rate % per annum] | Promissory note; if not documented, see Section 2 AFR table |
| Interest compounding | [simple / monthly / annually / other] | Promissory note |
| Interest payment frequency | [monthly / quarterly / annually / at maturity] | Promissory note |
| Principal repayment structure | [interest-only with balloon / fully amortizing / other] | Promissory note |
| Maturity date | [date] | Promissory note |
| Secured? | [secured by Five Points assets / ServisFirst note / unsecured] | Security agreement if exists |
| Late payment / default terms | [if any] | Promissory note |
If no written promissory note exists¶
This is a Priority 1 gap. Either: 1. Locate a note that was signed at funding but not imaged / stored 2. Reconstruct one in writing now, executed by Austin's parents as lenders and Austin (as Member) on behalf of Five Points BHM LLC. Reconstruction should preserve the economic terms that were agreed orally. Backdating is disfavored but documenting the original terms with current execution date and a recital ("the parties hereby confirm the terms of the loan originally extended on [date]") is a common solution.
Pearce Bevill and Alabama counsel (David C. Skinner LLC) should review any reconstruction.
Section 2 — AFR rate reference (for rate-setting or validation)¶
IRS publishes Applicable Federal Rates monthly in the Internal Revenue Bulletin. Look up the AFR for the month the loan was made. If the loan was made before written documentation exists, the lowest of the following three months can be used: the month of the loan, the prior month, or the second-prior month.
AFR categories:
| Category | Applies to loans of term |
|---|---|
| Short-term | ≤ 3 years |
| Mid-term | > 3 years, ≤ 9 years |
| Long-term | > 9 years |
To find the AFR: search "IRS AFR [month] [year]" or check apps.irs.gov/app/picklist/list/federalRates.html. Rates change monthly.
Example placeholder (for illustration only — confirm with actual month's AFR): - If loan was made in [2023/2024/2025] for a [5-year] term, use the mid-term AFR published for that month. - Recent mid-term AFRs have ranged roughly 3.5% to 5% annually. Use the actual published rate, not this estimate.
If the loan is stated at a rate ≥ the applicable AFR, §7872 imputed interest does not apply. If stated rate < AFR, the difference is imputed interest (phantom income to lender, phantom interest deduction to borrower) — messy, avoidable. Confirm the stated rate clears AFR.
Section 3 — Amortization schedule (to be generated)¶
Once Section 1 is populated, generate the table by running:
python3 scripts/fpa/afr_amortization.py \
--principal [amount] \
--rate [percent] \
--start-date [YYYY-MM-DD] \
--term-months [n] \
--structure [interest-only-balloon | fully-amortizing | interest-only-then-amort] \
[--io-months n # only with interest-only-then-amort]
(See scripts/fpa/afr_amortization.py for the helper script.)
Sample — illustrative only¶
Assumptions for this sample (NOT ACTUAL TERMS): - Principal: $500,000 USD - Rate: 4.50% (mid-term AFR placeholder) - Start date: 2024-01-15 - Term: 60 months (5 years) - Structure: Interest-only with balloon at maturity - Interest paid monthly
Monthly schedule (interest-only, sample — generated by scripts/fpa/afr_amortization.py with the assumptions above):
| Month | Period | Beginning Balance | Interest Accrued | Principal Paid | Ending Balance |
|---|---|---|---|---|---|
| 1 | 2024-01 | 500,000.00 | 1,047.95 | 0.00 | 500,000.00 |
| 2 | 2024-02 | 500,000.00 | 1,875.00 | 0.00 | 500,000.00 |
| 3 | 2024-03 | 500,000.00 | 1,875.00 | 0.00 | 500,000.00 |
| ... | ... | ... | ... | ... | ... |
| 12 | 2024-12 | 500,000.00 | 1,875.00 | 0.00 | 500,000.00 |
| 13 | 2025-01 | 500,000.00 | 1,875.00 | 0.00 | 500,000.00 |
| ... | ... | ... | ... | ... | ... |
| 60 | 2028-12 | 500,000.00 | 1,875.00 | 500,000.00 | 0.00 |
Monthly interest (full month): $500,000 × 4.50% / 12 = $1,875.00. Month 1 is pro-rated by day count from Jan 15: $500,000 × 4.50% × 17/365 = $1,047.95.
Annual interest (for 1099-INT):
| Year | Interest Paid | 1099-INT to lenders |
|---|---|---|
| 2024 | 21,672.95 (pro-rated start Jan 15) | Yes |
| 2025 | 22,500.00 | Yes |
| 2026 | 22,500.00 | Yes |
| 2027 | 22,500.00 | Yes |
| 2028 | 22,500.00 | Yes |
| Total | $111,672.95 |
Section 4 — 1099-INT tracking¶
Annual 1099-INT is required if interest paid in a year exceeds $10. Five Points BHM must issue 1099-INT to each lender.
| Tax year | Interest paid | 1099-INT issued (Y/N) | Date issued | Lender confirmation |
|---|---|---|---|---|
| 2024 | [TBD] | |||
| 2025 | [TBD] | |||
| 2026 | [TBD] | |||
| 2027 | [TBD] | |||
| 2028 | [TBD] |
Key compliance items:
1. 1099-INT to lenders by January 31 of year following payment year
2. 1096 transmittal + copies to IRS by February 28 (paper) or March 31 (electronic)
3. Parents must include interest income on their 1040 (Schedule B)
4. Five Points deducts interest expense in the year paid (not accrued), per §267 (see tax/advisory-tax-benefit-areas.md §E6)
Section 5 — Actual interest-payment log¶
Separate from the schedule (which shows what's supposed to happen), this log shows what actually happened each month. Variances should be tiny; any significant divergence flags a payment that didn't go per schedule.
| Payment Date | Scheduled Interest | Actual Interest Paid | Source / Memo | Payer Account → Recipient Account | Variance |
|---|---|---|---|---|---|
Populate as payments occur. Include wire memo or check number. This log is the single source of truth for 1099-INT totals.
Section 6 — Xero integration¶
Once populated, monthly book entries for Five Points BHM in Xero:
Each month interest is paid:
Dr 6430 Interest expense — AFR loan (Five Points) $[monthly interest]
Cr 1010 Brex Primary or 1060 Five Points Brex $[monthly interest]
(or via Due from Five Points intercompany if paid from Primary)
No principal activity for an interest-only loan until maturity.
At maturity, a balloon payment:
Tagging: Entity = Five Points BHM, Asset Class = Commercial Rental, on every entry.
Supporting documents attached to Xero record for each payment: - Wire receipt / ACH confirmation - Link to this amortization file (or copy of relevant row)
Section 7 — Defense documentation checklist¶
Items to have on file to defend the bona fide intrafamily-loan character under IRS scrutiny:
- Written promissory note (original or reconstructed with date confirmations)
- Stated interest rate meeting or exceeding the applicable AFR for the loan-origination month
- Actual interest payments made per schedule (not merely accrued)
- Annual 1099-INT to lenders
- Parents reporting interest income on their 1040 Schedule B
- Security documentation if loan is secured
- Amortization schedule (this file) kept current
- Year-end balance confirmation between Five Points' books and lenders' records
- No forgiveness / reduction of principal unless properly gift-recognized
Section 8 — Open items for Austin¶
Before this file can be operationalized:
- Locate the promissory note or confirm it needs reconstruction
- Confirm the specific terms (principal, rate, start date, structure)
- Provide lender TINs (your parents' SSNs) for 1099-INT issuance
- Confirm interest payment history — has Five Points actually paid interest in 2024 and 2025? From which account?
- Confirm prior 1099-INT issuance — have 1099-INTs been issued for 2024 and 2025 tax years? If not, this is a pre-2026 compliance gap to raise with Pearce.
Open items for Pearce Bevill¶
- §7872 analysis — confirm stated rate clears AFR for loan-origination month
- §267 compliance — ensure interest has actually been paid (not just accrued) each year to preserve deductibility at Five Points
- 1099-INT historical filings — were 2024 and 2025 1099-INTs issued? If not, plan corrective action
- Interest income on parents' 1040 — coordinate with parents' tax preparer to confirm matching treatment
- Gift-vs-loan characterization — if interest payments have been missed or forgiven, does that trigger deemed-gift treatment?