Problem regarding the nonrecourse bank loan

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In each of the following problems, identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify.

1. The Readyhough Corporation was incorporated in 2002. During 2009, the corporation had operating income of $80,000. Because of a strike at its major supplier, the corporation had an operating loss of $60,000 in 2010. The corporation expects to rebound in 2011, forecasting operating income of $140,000. The current interest rate is 6%.

2. Celine opens a jewelry store during the current year. She invests $20,000 of her own money and receives a nonrecourse bank loan of $80,000. During the current year, the store has a loss of $24,000.

Reference no: EM13991383

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