It's your friend that may have a tax problem
IRC code sec 7872 covers below market interest rate loans.
If the loan id s below $10,000 it's exempt from this code section
IRC 7872(c)(2)
$10,000 for gift loans between individuals
(A)In general
In the case of any gift loan directly between individuals, this section shall not apply to any day on which the aggregate outstanding amount of loans between such individuals does not exceed $10,000.
(3)Gift loan
The term “gift loan” means any below-market loan where the forgoing of interest is in the nature of a gift.
this exception does not apply to certain types of loans
