Deerwood Corporation lends its principal shareholder, Lafayette, $500,000 on July 1 of the current year. The loan is interest-free and payable on demand. On December 31, the imputed interest rules are applied. Assume that the Federal rate is 3%, compounded semiannually. What are the tax consequences of this loan to Lafayette?
Dividend Income :
Dividend income means the part of the net income which is paid for the dividend as a return for holding of shares in the company and this will be part of the financial statement.
Answer and Explanation:
|Interest free is treted as dividend||500000 * 3 % * 6 / 12||7500|
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from Corporate Finance: Help & ReviewChapter 2 / Lesson 10