The Effects of a Below-Market Loan for $100,000 Made by a Corporation

question 2

Multiple Choice

The effects of a below-market loan for $100,000 made by a corporation to its chief executive officer as an enticement to get him to remain with the company are:

• A) The corporation has imputed interest income and the employee is deemed to have received a gift.
• B) The corporation has imputed interest income and dividends paid.
• C) The employee has no income unless the funds are invested and produce investment income for the year.
• D) The employee has imputed compensation income and the corporation has imputed interest income.
• E) None of these.

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Definitions:

Electrical Circuits

Networks of electrical components connected together to allow the flow of electrical current in a complete path.

Control Coils

Electromagnetic coils used in relay and contactor units to create a magnetic field that actuates the device.

Magnetic Flux

A measure of the quantity of magnetism, considering the strength and the extent of a magnetic field.

Indicator Lamps

Visual devices that show the status of an operation or condition, often using light to indicate on/off states or warnings.