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Deerwood Corporation lends its principal shareholder, Lafayette, $500,000 on July 1 of the...

Question:

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:

Particulars Calculations Results
Interest free  is treted as dividend 500000  * 3 % * 6 / 12 7500


Learn more about this topic:

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What Is Dividend Yield? - Definition & Calculation

from Corporate Finance: Help & Review

Chapter 2 / Lesson 10
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