L and R Each Want to Start Their Own Business

question 17

True/False

L and R each want to start their own business.L transfers $500,000 to his corporation for shares of stock and a note bearing 10 percent interest, the interest being payable in annual installments of $50,000 for 20 years.R transfers to his corporation $500,000 solely in exchange for stock.Both wish to receive $50,000 from their corporations at the end of the first year.L receives a $50,000 interest payment and R receives a $50,000 dividend.On their individual returns L and R will report ordinary income of $50,000, but only L's corporation can claim a $50,000 deductible expense.

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Definitions:

Parental Investment

Any contribution by a parent to an offspring that increases the offspring's chance of surviving and reproducing at the cost of the parent's ability to invest in other offspring.

R-Selection

Pattern of natural selection in which producing the most offspring the most quickly is adaptive; occurs when population density is low and resources are abundant.

Ecological Footprint

Area of Earth’s surface required to sustainably support a particular level of development and consumption.

World Average

A statistical average or median metric that represents global data across various categories, such as temperature, income, or health indicators.