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  3. jasmine made a $60,000 interest-free loan to her s

Jasmine made a $60,000 interest-free loan to her son, Farhad, who used the money to...

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Accounting

Jasmine made a $60,000 interest-free loan to her son, Farhad, who used the money to start a new business. Farhad's only sources of income were $25,000 from the business and $490 of interest on his checking account. The relevant Federal interest rate was 5%. Based on this information:
a. Farhad's gross income must be increased by the $3,000(0.05\times $60,000) imputed interest income on the below-market loan.
b. Farhad's business net profit will be reduced by $3,000(0.05\times $60,000) of interest expense.
c. Jasmine does not recognize any imputed interest income and Farhad does not recognize any imputed interest expense.
d. Jasmine must recognize $3,000(0.05\times $60,000) of imputed interest income on the below-market loan.

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