Wendell Is an Executive with CFO Tires

question 82

Essay

Wendell is an executive with CFO Tires.At the beginning of this year the corporation loaned Wendell $50,000 at an interest rate of one percent.Wendell would have paid interest of $2,500 this year if the interest rate on the loan had been set at the prevailing Federal interest rate.Wendell used the funds as a down payment on a vacation home and during the year he paid $500 of interest to CFO.On December 31,CFO forgave the loan and remaining interest.What amount of gross income does Wendell recognize from the loan this year?

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Definitions:

Foucault

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