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Both Albert and Elva Own 50% of the Stock of Eagle

question 21

Essay

Both Albert and Elva own 50% of the stock of Eagle, Inc. a C corporation). To cover what is perceived as temporary working capital needs, each shareholder loans Eagle $200,000 with an annual interest rate of 3% same as the Federal rate) and a maturity date of one year. The loan is made at the beginning of 2019.
a. What are the tax consequences to Albert, Elva, and Eagle if the loans are classified as debt?
b. What are the tax consequences to Albert, Elva, and Eagle if the loans are classified as equity?


Definitions:

Right Atrium

The right atrium is one of the four chambers of the heart, receiving deoxygenated blood from the body and pumping it into the right ventricle.

Blood Pressure

The pressure exerted by circulating blood upon the walls of blood vessels, often measured for health assessment.

Ventricles Contract

The phase of the cardiac cycle in which the ventricles of the heart contract, pumping blood to the body and lungs.

SA Node

The SA Node, or sinoatrial node, acts as the heart's natural pacemaker, generating electrical impulses that initiate the heartbeat.

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