Sarah, a Majority Shareholder in Teal, Inc

question 66

Multiple Choice

Sarah, a majority shareholder in Teal, Inc., made a $200,000 interest-free loan to the corporation.Sarah is not an employee of the corporation.

• A)Sarah must recognize imputed interest expense and the corporation must recognize imputed interest income.
• B)Sarah must recognize imputed interest income and the corporation must recognize imputed interest expense.
• C)Sarah must recognize imputed dividend income and the corporation may recognize imputed interest expense.
• D)Neither Sarah's nor the corporation's gross income is affected by the loans because no interest was charged.
• E)None of these.

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