Solution%20to%20Assignment%20Problem%20Ch15%28II%29

Solution%20to%20Assignment%20Problem%20Ch15%28II%29 -...

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Solution to Assignment Problem Fifteen - 7 The tax consequences associated with these loans are as follows: Dwelling Loan As such loans are available to all employees, Ms. Lord can claim that he has received the loan in her capacity as an employee. This means that the $200,000 principal does not have to be included in her 2010 Net Income For Tax Purposes. However, as the rate on the loan is below the prescribed rate, there will be a taxable benefit included in Ms. Lord’s Net Income For Tax Purposes. The amount to be accrued for 2010 is $1,000 [($200,000)(2% - 1%)(6/12)]. For 2011, the amount is $1,600 [($200,000 - $40,000)(2% - 1%)(12/12)], and for 2012, the amount is $1,200 [($200,000 - $80,000)(2% - 1%)(12/12)]. Automobile As there are no bona fide arrangements for repaying the loan, the $25,000 principal amount must be included in Ms. Lord’s 2010 Net Income For Tax Purposes. There will be no taxable interest benefit. However, when the loan is repaid, the $25,000 principal amount can be deducted in the determination of Net Income For Tax Purposes. Other Loans February 1, 2010 As this loan is not repaid prior to August 31, 2011 (the second corporate year end), it has to be included in Ms. Lord’s 2010 Net Income For Tax Purposes. In 2012, the year it is repaid,
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Solution%20to%20Assignment%20Problem%20Ch15%28II%29 -...

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