Luma, who works for Microsoft Corp and owns 10,000 shares of American Airlines borrowed the following amounts: A) $50,000 from her father at no interest. B) $80,000 from Microsoft Corp at no interest. C) $60,000 from American Airlines at no interest Assume the applicable federal rate is 4 percent. Required: a. Explain the tax consequences (for both Luma and the lenders) of these loans if Luma uses the money for a vacation. b. How would your answer change if Luma uses the money to invest in bonds paying 6 percent interest?
Luma, who works for Microsoft Corp and owns 10,000 shares of American Airlines borrowed the following amounts: A) $50,000 from her father at no interest. B) $80,000 from Microsoft Corp at no interest. C) $60,000 from American Airlines at no interest Assume the applicable federal rate is 4 percent. Required: a. Explain the tax consequences (for both Luma and the lenders) of these loans if Luma uses the money for a vacation. b. How would your answer change if Luma uses the money to invest in bonds paying 6 percent interest?
Chapter4: Gross Income: Concepts And Inclusions
Section: Chapter Questions
Problem 25CE
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Luma, who works for Microsoft Corp and owns 10,000 shares of American Airlines borrowed
the following amounts:
A) $50,000 from her father at no interest. B) $80,000 from Microsoft Corp at no interest.
C) $60,000 from American Airlines at no interest Assume the applicable federal rate is 4 percent. Required:
a. Explain the tax consequences (for both Luma and the lenders) of these loans if Luma uses the
money for a vacation.
b. How would your answer change if Luma uses the money to invest in bonds paying 6 percent interest?
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