As I understand it, USA IRS rules require "interest" be reported as income by the one who receives it. If someone makes a loan without requiring interest, the IRS requires that the lender to declare imputed interest income as income for tax purposes.
So if Ahmed, a Shariah-compliant USA citizen in Denver, lends Abdul, a Shariah-compliant USA citizen in Alabama, $250,000 to buy a house, to be repaid $25,000 per year for ten years, then Ahmed must declare as income what the IRS says Ahmed should have made charging usury on the loan.
If the imputed rate is 2%, then because Ahmed is required by his religion to charge no usury (commonly misnamed "interest") to Abdul, Ahmed must report $5000 in income upon which at 20% tax rate (say) he needs to pay Uncle Sam $1000 for making the loan. (Since Abdul is paying $25,000 per year, the principle drops by $25,000, and the taxes etc accordingly each year.)
Now, this would form a classic case in Canon Law of interest, in the correct sense of the word. For over 2000 years "interest" has meant taking a loss, not taking a gain. (The word interest has been abused to mean the opposite of what it meant for most of its history.) In Canon Law, if you take a loss from making a loan, you may in justice have the beneficiary of the loan make good the lender experienced offering the loan. I suspect in Shariah law there is a similar rule.
But here again the IRS steps in. If Abdul makes good Ahmed's $1000 loss to the IRS, Ahmed must declare that $1000 as income. What a mess!
So what if Abdul's halal grocery is falsely accused of funding terror and he is run out of business, and cannot repay Ahmed. Ahmed, recalling that Allah favors the compassionate, forgives Abdul's loan, with a balance at that point of say $200,000.
Now Abdul has a new problem under USA IRS rules, not to mention a ruined halal grocery business. That forgiven debt is now considered income by the IRS, and Abdul owes a tax (at say 20%) of $40,000 to the IRS. I understand there is an exception to this for mortgages, but only if a commercial lender makes the loan. Abdul is stuck.
Now, the IRS is not cruel. They will make a payment plan if Abdul is out of work and truly cannot pay off the $40,000 when due. And the payment plan requires "interest," correctly termed usury, to be paid for the life of the IRS payment plan. This is a violation of Abdul's religious requirements.
Although what I present above relates to Shariah-compliant loans, it all applies equally to Christian teaching on usury as well. The Catholic Church Strictly forbids usury, as strictly as does the Shariah. It is a big topic, one we'll be elucidating here, and what it may mean for the new economy that will arise from the ashes.
So if Ahmed, a Shariah-compliant USA citizen in Denver, lends Abdul, a Shariah-compliant USA citizen in Alabama, $250,000 to buy a house, to be repaid $25,000 per year for ten years, then Ahmed must declare as income what the IRS says Ahmed should have made charging usury on the loan.
If the imputed rate is 2%, then because Ahmed is required by his religion to charge no usury (commonly misnamed "interest") to Abdul, Ahmed must report $5000 in income upon which at 20% tax rate (say) he needs to pay Uncle Sam $1000 for making the loan. (Since Abdul is paying $25,000 per year, the principle drops by $25,000, and the taxes etc accordingly each year.)
Now, this would form a classic case in Canon Law of interest, in the correct sense of the word. For over 2000 years "interest" has meant taking a loss, not taking a gain. (The word interest has been abused to mean the opposite of what it meant for most of its history.) In Canon Law, if you take a loss from making a loan, you may in justice have the beneficiary of the loan make good the lender experienced offering the loan. I suspect in Shariah law there is a similar rule.
But here again the IRS steps in. If Abdul makes good Ahmed's $1000 loss to the IRS, Ahmed must declare that $1000 as income. What a mess!
So what if Abdul's halal grocery is falsely accused of funding terror and he is run out of business, and cannot repay Ahmed. Ahmed, recalling that Allah favors the compassionate, forgives Abdul's loan, with a balance at that point of say $200,000.
Now Abdul has a new problem under USA IRS rules, not to mention a ruined halal grocery business. That forgiven debt is now considered income by the IRS, and Abdul owes a tax (at say 20%) of $40,000 to the IRS. I understand there is an exception to this for mortgages, but only if a commercial lender makes the loan. Abdul is stuck.
Now, the IRS is not cruel. They will make a payment plan if Abdul is out of work and truly cannot pay off the $40,000 when due. And the payment plan requires "interest," correctly termed usury, to be paid for the life of the IRS payment plan. This is a violation of Abdul's religious requirements.
Although what I present above relates to Shariah-compliant loans, it all applies equally to Christian teaching on usury as well. The Catholic Church Strictly forbids usury, as strictly as does the Shariah. It is a big topic, one we'll be elucidating here, and what it may mean for the new economy that will arise from the ashes.
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