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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