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What are the tax consequences of this transaction

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Question - Martin Locks owns 100 percent of the shares of Locks Inc., a corporation with a December 31 year end. In January 2019, the corporation loans Martin $350,000 in order to assist him in acquiring a new principal residence. The loan is interest free and will be paid back on January 1, 2021. While small loans are made to other employees of the Company, a loan of this size is only available to Martin. Assume that the prescribed rate is 4 percent throughout 2019 and 5 percent throughout 2020. What are the tax consequences of this transaction to Martin in 2019, 2020 and 2021?

Reference no: EM132547731

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