Question 1
Imputation of interest could be required on all of the following loans
with the exception of◦ a loan between a partnership and a 55% partner.
◦ a loan between a mother and son.
◦ a loan between an employer and employee.
◦ a loan between two best friends.
Question 2
Jennifer made interest-free gift loans to each of her four children as follows:
(1) John borrowed $9,500 to purchase an automobile. His net investment income is $1,500.
(2) Rick borrowed $50,000 to purchase a trailer. His net investment income is $900.
(3) Bert borrowed $25,000 to purchase stock. His net investment income is $1,200.
(4) Elizabeth borrowed $110,000 to purchase a home. Her net investment income is $800.
Assuming a 5% interest rate, on which loans must interest be imputed?
◦ loan to John and Bert
◦ loan to Bert and Elizabeth
◦ loan to Rick, Bert, and Elizabeth
◦ All of the loans are subject to the imputed interest rules.
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