The concept of intra-family gifts is well understood. If Art and Bob are brothers, and if Art transfers property to Bob for no consideration, then Art has made a gift to Bob. If the value of that gift (cumulative with all other gifts from Art to Bob in the same calendar year) exceeds the annual exclusion amount, then Art is required to report the gift on a federal gift tax return (Form 709). If instead of gifting property to Bob, Art makes a loan to Bob, Art has again made a gift unless the loan bears interest at or above the applicable federal rate (AFR).
What happens under Section 7872 if the loan does bear interest but at a rate below the AFR?
A gift may be imputed, as is explained in the full article by Michael S. Strauss, "Unwrap Some 'Gift Loan' Complexities of Section 7872," from the May 2015 issue of Estate Planning.