Sharon made a 60000 interestfree loan to her son todd

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South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
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Chapter 10 / Exercise 47
South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
Raabe/Young/Nellen/Hoffman
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93. Sharon made a $60,000 interestfree loan to her son, Todd, who used the money to start a new business. Todd's only sources of income were $25,000 from the business and $490 of interest on his checking account. The relevant Federal interest rate was 5%. Based on the above information: a. Todd's business net profit will be reduced by $3,000 (.05 × $60,000) of interest expense. b. Sharon must recognize $3,000 (.05 × $60,000) of imputed interest income on the below- market loan.
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South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
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Chapter 10 / Exercise 47
South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
Raabe/Young/Nellen/Hoffman
Expert Verified
c. Todd's gross income must be increased by the $3,000 (.05 × $60,000) imputed interest income on the below market loan. d. Sharon does not recognize any imputed interest income and Todd does not recognize any imputed interest expense. e. None of these is correct. d 94. Jay, a single taxpayer, retired from his job as a public school teacher in 2014. He is to receive a retirement annuity of $1,200 each month and his life expectancy is 180 months. He contributed $36,000 to the pension plan during his 35- year career; so his adjusted basis is $36,000. Jay collected 192 payments before he died. What is the correct method for reporting the pension income?
95. In 2014 Todd purchased an annuity for $150,000. The annuity is to pay him $2,500 per month for the rest of his life. His life expectancy is 100 months. Which of the following is correct?
c. For each $2,500 payment received in the first year, Todd must include $1,000 in gross income. d. For each $2,500 payment received in the first year, Todd must include $1,500 in gross income. e. None of these. c 96. Mark a calendar year taxpayer, purchased an annuity for $50,000 in 2012. The annuity was to pay him $3,000 on the first day of each year, beginning in 2012, for the remainder of his life. Mark's life expectancy at the time he purchased the annuity was 20 years. In 2014 Mark developed a deadly disease, and doctors estimated that he would live for no more than 24 months.

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