Pete's employer loaned him $150,000 this year (interest-free) to buy a new boat. If the federal interest rate was 3 percent, which of the following is correct? A Pete's employer recognizes $4,500 of deductible interest expense. B Pete recognizes $4,500 of imputed dividend income. C) Pete recognizes $4,500 of imputed compensation income. D) Pete recognizes $4,500 of taxable interest income.

Pete's employer loaned him $150,000 this year (interest-free) to buy a new boat. If the federal interest rate was 3 percent, which of the following is correct? A Pete's employer recognizes $4,500 of deductible interest expense. B Pete recognizes $4,500 of imputed dividend income. C) Pete recognizes $4,500 of imputed compensation income. D) Pete recognizes $4,500 of taxable interest income.