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

question 1775

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

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