Exercise 5-21 (LO. 6) Deerwood Corporation lends its principal shareholder, Lafayette, $500,000 on July 1...
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Accounting
Exercise 5-21 (LO. 6)
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?
Lafayette has
interest income dividend incomea return of capital
of $fill in the blank 2 and Deerwood has
a dividend payable interest expense interest income
of $fill in the blank 4.
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