What is the taxable interest of the given interest-free loan

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Reference no: EM131884781

Problem

John's salary income in 2013 is $18. John is a UM student, who is picked to be on Jeopardy. Thankfully, it is John's lucky day and both of his opponents are Buckeyes, thus John is almost guaranteed a win. Sure enough, John breaks the all-time Jeopardy single session record and wins $79 in July of 2013, while both of his Buckeyes opponents finish with negative winnings. What is John's gross income in 2013? On January 1, 2013, Josh loaned his son Seth $100,000, interest-free. Seth uses the money to invest in corporate bonds paying 8% annual interest. Assume that the applicable federal rate of interest is 5%. You may also assume that Seth's net investment income (from a corporate dividend) is $4,000. What (if any) is the taxable interest of this interest-free loan? On January 1, 2013, Bob loaned his son Zack $100,000, interest-free. Zack uses the money to invest in corporate bonds paying 8% annual interest. Assume that the applicable federal rate of interest is 5%. Now assume that the net investment income is $900 (from a corporate dividend), and Zack uses the money to start a business. What (if any) is the taxable interest of this interest-free loan?

Reference no: EM131884781

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