Elizabeth made the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose o

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Elizabeth Made The Following Interest Free Loans During The Year Assume That Tax Avoidance Is Not A Principal Purpose O 1 (40.24 KiB) Viewed 51 times

Elizabeth made the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans. Assume that the relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year. Borrower's Net Borrower Amount Investment Income Purpose of Loan Richard $5,000 $800 Gift Woody $8,000 Purchase stock Irene $105,000 Purchase residence $600 $0 What are the effects of the imputed interest rules on these transactions? Compute Elizabeth's gross income from each loan. If an amount is zero, enter "O". a. Richard is not ✓ subject to the imputed Interest rules because the $10,000 gift loan exception does apply, Elizabeth's gross income from the loan is $ 118000. x b. The $10,000 exception does not apply to the loan to Woody because the proceeds were used to purchase income producing assets. Although the $100,000 exception applies to this loan, the amount of imputed interest is o Elizabeth's gross income from the loan is $ 105,000. x. c. None of the exceptions apply to the loan to Irene because the loan was for more than $100,000 Elizabeth's gross income from the loan is s 2,690. X.