Which of the Following Interest-Free Loans Is Subject to the Imputed

question 80

Multiple Choice

Which of the following interest-free loans is subject to the imputed interest rules (i.e., interest must be imputed on the loan) ?
I.Benito loans $250,000 to his son. His son uses the money to open a new business. During the current year, the business shows a loss and his son has no other sources of income.
II.Bisbane Corporation loans $8,000 to its principal shareholder. The shareholder uses the funds to buy additional shares of stock in Arcane. The shareholder is deemed to receive $4,000 of dividends from Brisbane during the year.
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• A)Only loan I.
• B)Only loan II.
• C)Both loans.
• D)Neither loan.

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Definitions:

Formal Position

An officially recognized or established role within an organization, typically accompanied by specific duties, responsibilities, and levels of authority.

Legitimate Power

A form of authority where power is granted through an organizational structure or societal norms.

Expert Power

Influence wielded by an individual or group due to their recognized knowledge or expertise in a specific area.

Manager's Authority

The rights and powers entrusted to a manager to make decisions and direct resources and personnel towards the accomplishment of organizational objectives.