Elaine Loaned Her Brother, Mike, $175,000 to Purchase a New

question 48

Multiple Choice

Elaine loaned her brother, Mike, $175,000 to purchase a new home. Elaine does not charge Mike any interest on the loan. What are the tax consequences to Elaine and Mike?

• A)Elaine is treated as having made a gift of the forgone interest on the $175,000 loan to Mike.
• B)Elaine only has to impute interest on $75,000 of the loan to Mike.
• C)If Mike has no net investment income, Elaine does not have to treat the forgone interest as a gift.
• D)Mike can deduct the interest that he is deemed to have paid Elaine.

---

Definitions:

High-Fiber Diet

A diet rich in foods that contain a lot of fiber, which aids in digestion and is beneficial for heart and gut health.

Loperamide

A medication commonly used to reduce the frequency of diarrhea by slowing down the movement of the gut.

Continuous Oozing

The ongoing seepage of fluid, often blood or serous fluid, from a wound or incision site, indicating a potential problem in healing.

Skin Barrier Cream

A topical preparation used to protect the skin from irritants and moisture, often used in the management of incontinence or skin breakdown.