In 2016 Bonnie, a Sole Proprietor, Loaned Her Employee, John

question 1388

Multiple Choice

In 2016 Bonnie, a sole proprietor, loaned her employee, John, $10,000 to help him buy a car. In 2018, before he repaid the $10,000, Bonnie told John that she was "tearing up" the $10,000 note in recognition of his strong job performance. How should John treat the amount forgiven?

• A) taxable income in year of loan
• B) excludible gift in year of forgiveness
• C) excludible gift in year of loan
• D) taxable income in year of forgiveness

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Definitions:

Falling Output

A situation where the quantity of goods or services produced by an economy decreases over time.

World Interest Rates

The average level of interest rates across different countries, significantly influenced by major economies' monetary policies.

Real Interest Rates

The interest rate adjusted for inflation, reflecting the real cost of borrowing or the real yield on savings.

Capital Markets

Financial markets where long-term debt or equity-backed securities are bought and sold, facilitating the raising of capital by companies and governments.