Riva Borrows $10,000 That She Intends to Use for Purchasing

question 105

Multiple Choice

Riva borrows $10,000 that she intends to use for purchasing supplies for her business.She temporarily deposits the funds in her personal checking account.Prior to the deposit,the checking account held $40,000 of personal funds.Riva books a vacation for $6,000 and writes a check to the travel agency from her personal account.Later in the month,the business supplies bill arrives and Riva writes a check for $10,000 from the personal account.With respect to the interest expense on the $10,000 loan,

• A)it will all be treated trade or business expense.
• B)60 percent will be treated as personal interest expense and 40 percent as trade or business expense.
• C)it will all be treated as personal expense.
• D)20 percent will be treated trade or business expense.

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