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

question 80

Multiple Choice

Which of the following interest-free loans is subject to the imputed interest rules (i.e., interest must be imputed on the loan) ?
I.Benito loans $250,000 to his son. His son uses the money to open a new business. During the current year, the business shows a loss and his son has no other sources of income.
II.Bisbane Corporation loans $8,000 to its principal shareholder. The shareholder uses the funds to buy additional shares of stock in Arcane. The shareholder is deemed to receive $4,000 of dividends from Brisbane during the year.
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• A)Only loan I.
• B)Only loan II.
• C)Both loans.
• D)Neither loan.

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Definitions:

Doge's Palace

A gothic-style palace in Venice, Italy, that served as the residence of the Doge and the seat of Venetian government, known for its ornate design and political significance in Venetian history.

Palazzo del Tè

A mannerist architectural masterpiece in Mantua, Italy, designed by Giulio Romano, known for its playful and innovative design elements.

Giulio Romano

An Italian painter and architect of the High Renaissance and early Mannerist periods, known for his work in Raphael's school and for his contributions to the Palazzo del Te in Mantua.

Federico Gonzaga

An Italian nobleman and the Duke of Mantua from 1519 until his death in 1540, known for his patronage of the arts during the Renaissance.