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Problem 4 (15 points) I On January 1, Year 1, Marge made a $60,000 interest-free loan...
On January 1, Year 1, Marge made a $60,000 interest-free loan to her son, Steve, who...
On January 1, Year 1, Marge made a $60,000 interest-free loan to her son, Steve, who used the money to start a new business. Steve's only sources of income were $50,000 ordinary income from the business and $1,200 of net investment income from a corporate dividend. The relevant federal interest rate was 5%. (a) What is taxable interest (if any) of this interest-free loan? (5 pts) (b) What is the net effect of the taxable interest (if any) of the...
On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the...
On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the money to pay off the $40,000 mortgage on his personal residence and also to buy a $50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000 and $2,000 interest income on the certificate of deposit. The relevant Federal interest rate is 3% compounded semiannually. The loan is outstanding for the entire year. 5. Based on the above information, what...
Exercise 4-24 (Algorithmic) (LO. 4) Elizabeth made the following interest-free loans during the year. Assume that...
Exercise 4-24 (Algorithmic) (LO. 4) Elizabeth made the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans. Assume that the relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year. Borrower's Net Investment Income Borrower Amount Purpose of Loan Gift Richard $4,250 $0 Woody $450 $5,100 $153,500 Purchase stock Purchase residence $0 Irene What are the effects of the imputed...
QUESTION 1 Maria loaned both of her children $10,000 interest free on January 1, 2019. Bobby...
QUESTION 1 Maria loaned both of her children $10,000 interest free on January 1, 2019. Bobby used his loan proceeds to make a down payment on his personal residence. His net investment income was 51,025 for 2019. Shelia used her loan proceeds to purchase Amazon stock. Her net investment income was $1,010 for 2019. Assuming Maria was not attempting to shift income to the children, and the applicable Federal rate is 10% how much interest income must she include on...
Can steps be shown in solving this. Problem 4-33 (LO. 10) Apply the imputed interest rules...
Can steps be shown in solving this.
Problem 4-33 (LO. 10) Apply the imputed interest rules in the following situations. If an amount is zero, enter "0". a. Mike loaned his sister Shonda $90,000 to buy a new home. Mike did not charge interest on the loan. The Federal rate was 4%. Shonda earned $900 of investment income for the year. The imputed amount is $ b. Nico's employer maintains an emergency loan fund for its employees. During the year,...
Maria loaned both of her children $10,000 interest free on January 1, 2019. Bobby used his...
Maria loaned both of her children $10,000 interest free on January 1, 2019. Bobby used his loan proceeds to make a down payment on his personal residence. His net investment income was $1,025 for 2019. Shelia used her loan proceeds to purchase Amazon stock. Her net investment income was $1,010 for 2019. Assuming Maria was not attempting to shift income to the children, and the applicable Federal rate is 10%, how much interest income must she include on her 2019...
Problem 17-30 (LO. 1) In the current year, Azure Company has $350,000 of net operating income...
Problem 17-30 (LO. 1) In the current year, Azure Company has $350,000 of net operating income before deducting any compensation or other payment to its sole owner, Sasha. In addition, Azure has interest on municipal bonds of $25,000. Sasha has significant income from other sources and is in the 37% marginal tax bracket. Based on this information, determine the income tax consequences to Azure Company and to Sasha during the year for each of the following independent situations. (Ignore the...
For a business with no interest income, what is the limitation on business interest deductions? What...
For a business with no interest income, what is the limitation
on business interest deductions?
What businesses are not subject to this limitation?
For a business that is subject to the limitation, what benefit
can the business get from interest payments that exceed the limit?
Give an example. For this question please refer to the screen shot
posted.
Limitation on Business Interest Deductions THE KEY FACTS BUSINESS INTEREST LIMITATION • The deduction of business interest expense is limited to business...
Problem 14-45 (LO. 2, 3, 5) Melaney has had a bad year with her investments. She...
Problem 14-45 (LO. 2, 3, 5) Melaney has had a bad year with her investments. She lent a friend $8,000; the friend did not repay the loan when it was due and then declared bankruptcy. The loan is totally uncollectible. Melaney also was notified by her broker that the Oak corporate bonds she owned became worthless on December 31, 2019. She had purchased the bonds for $22,000 on November 10, 2018. Melaney also had a $60,000 loss on the disposition...
Q1 A 4 year business loan was taken out commencing on 1 July 2017. The loan...
Q1 A 4 year business loan was taken out commencing on 1 July 2017. The loan establishment fee was $1,600. The deduction of the borrowing expenses in the 2018 financial year should be ____ Select one: a. $1,600 c. $400 d. nil Q2 A 8 year business loan was taken out commencing on 1 July 2017. The loan establishment fee was $1,600. The deduction of the borrowing expenses in the 2018 financial year should be ____. Select one: a. nil...
On January 1, Year 1, Marge made a $60,000 interest-free loan to her son, Steve, who used the money to start a new business. Steve's only sources of income were $50,000 ordinary income from the business and $1,200 of net investment income from a corporate dividend. The relevant federal interest rate was 5%. (a) What is taxable interest (if any) of this interest-free loan? (5 pts) (b) What is the net effect of the taxable interest (if any) of the...
On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the money to pay off the $40,000 mortgage on his personal residence and also to buy a $50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000 and $2,000 interest income on the certificate of deposit. The relevant Federal interest rate is 3% compounded semiannually. The loan is outstanding for the entire year. 5. Based on the above information, what...
Exercise 4-24 (Algorithmic) (LO. 4) Elizabeth made the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans. Assume that the relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year. Borrower's Net Investment Income Borrower Amount Purpose of Loan Gift Richard $4,250 $0 Woody $450 $5,100 $153,500 Purchase stock Purchase residence $0 Irene What are the effects of the imputed...
QUESTION 1 Maria loaned both of her children $10,000 interest free on January 1, 2019. Bobby used his loan proceeds to make a down payment on his personal residence. His net investment income was 51,025 for 2019. Shelia used her loan proceeds to purchase Amazon stock. Her net investment income was $1,010 for 2019. Assuming Maria was not attempting to shift income to the children, and the applicable Federal rate is 10% how much interest income must she include on...
Can steps be shown in solving this.
Problem 4-33 (LO. 10) Apply the imputed interest rules in the following situations. If an amount is zero, enter "0". a. Mike loaned his sister Shonda $90,000 to buy a new home. Mike did not charge interest on the loan. The Federal rate was 4%. Shonda earned $900 of investment income for the year. The imputed amount is $ b. Nico's employer maintains an emergency loan fund for its employees. During the year,...
Problem 17-30 (LO. 1) In the current year, Azure Company has $350,000 of net operating income before deducting any compensation or other payment to its sole owner, Sasha. In addition, Azure has interest on municipal bonds of $25,000. Sasha has significant income from other sources and is in the 37% marginal tax bracket. Based on this information, determine the income tax consequences to Azure Company and to Sasha during the year for each of the following independent situations. (Ignore the...
For a business with no interest income, what is the limitation
on business interest deductions?
What businesses are not subject to this limitation?
For a business that is subject to the limitation, what benefit
can the business get from interest payments that exceed the limit?
Give an example. For this question please refer to the screen shot
posted.
Limitation on Business Interest Deductions THE KEY FACTS BUSINESS INTEREST LIMITATION • The deduction of business interest expense is limited to business...
Problem 14-45 (LO. 2, 3, 5) Melaney has had a bad year with her investments. She lent a friend $8,000; the friend did not repay the loan when it was due and then declared bankruptcy. The loan is totally uncollectible. Melaney also was notified by her broker that the Oak corporate bonds she owned became worthless on December 31, 2019. She had purchased the bonds for $22,000 on November 10, 2018. Melaney also had a $60,000 loss on the disposition...
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