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

question 97

Multiple Choice

Which of the following interest-free loans is subject to the imputed interest rules?
I.Lena needed $5,000 to pay off some gambling debts. Her employer loans her the $5,000.
II.Sherry loans her son $130,000 to purchase a motor home to use in his landscaping business. Her son has no investment income for the year.
​

• A)Only loan I.
• B)Only loan II.
• C)Both loans.
• D)Neither loan.

---

Definitions:

Stock Split

An action by a company to divide its existing shares into multiple shares to boost the liquidity of the shares, though the overall value of the shares remains the same.

Retained Earnings

Cumulative earnings of a company that are not distributed to the owners and are reinvested in the business.

2-for-1

Describes a type of stock split where a company divides its existing stock into two shares, effectively doubling the number of shares owned by shareholders but potentially halving the price per share.

Dividend Yield Ratio

A financial ratio that indicates how much a company pays out in dividends each year relative to its share price.