Elizabeth makes the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans. The relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year. Borrower's Net Borrower Amount Investment Income Purpose of Loan Richard $5,000 $800 Gift Woody $8,000 $600 Stock purchase Irene $105,000 $0 Purchase principal residence By how much do each of these loans increase Elizabeth's gross income? If an amount is zero, enter "0". a. Richard is not subject to the imputed interest rules because the $10,000 gift loan exception does apply. Elizabeth's gross income from the loan is $ 0 b. The $10,000 exception does not income producing apply to the loan to Woody because the proceeds were used to purchase assets. Although the $100,000 exception applies to this loan, the amount of imputed interest is 1,000 X.Incorrect is $ 0 ✓. c. None of the exceptions apply gross income from the loan is $ to the loan to Irene because the loan was for more than $100,000 ✓. Elizabeth's
Elizabeth makes the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans. The relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year. Borrower's Net Borrower Amount Investment Income Purpose of Loan Richard $5,000 $800 Gift Woody $8,000 $600 Stock purchase Irene $105,000 $0 Purchase principal residence By how much do each of these loans increase Elizabeth's gross income? If an amount is zero, enter "0". a. Richard is not subject to the imputed interest rules because the $10,000 gift loan exception does apply. Elizabeth's gross income from the loan is $ 0 b. The $10,000 exception does not income producing apply to the loan to Woody because the proceeds were used to purchase assets. Although the $100,000 exception applies to this loan, the amount of imputed interest is 1,000 X.Incorrect is $ 0 ✓. c. None of the exceptions apply gross income from the loan is $ to the loan to Irene because the loan was for more than $100,000 ✓. Elizabeth's
Chapter4: Gross Income: Concepts And Inclusions
Section: Chapter Questions
Problem 25CE
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Transcribed Image Text:Elizabeth makes the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans.
The relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year.
Borrower's Net
Borrower Amount
Investment Income Purpose of Loan
Richard
$5,000
$800
Gift
Woody
$8,000
$600
Stock purchase
Irene
$105,000
$0
Purchase principal residence
By how much do each of these loans increase Elizabeth's gross income?
If an amount is zero, enter "0".
a. Richard is not
subject to the imputed interest rules because the $10,000 gift loan exception does
apply. Elizabeth's
gross income from the loan is $
0
b. The $10,000 exception does not
income producing
apply to the loan to Woody because the proceeds were used to purchase
assets. Although the $100,000 exception applies
to this loan, the amount of imputed interest is
1,000 X.Incorrect
is $
0 ✓.
c. None of the exceptions apply
gross income from the loan is $
to the loan to Irene because the loan was for more than $100,000
✓. Elizabeth's
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