Jennifer made interest-free gift loans to each of her four children as follows:
John borrowed $9,500 to purchase an automobile. His net investment income is $1,500.
Rick borrowed $50,000 to purchase a trailer. His net investment income is $900.
Bert borrowed $25,000 to purchase stock. His net investment income is $1,200.
Elizabeth borrowed $110,000 to purchase a home. Her net investment income is $800.
Assuming a 5% interest rate, on which loans must interest be imputed?
A. loans to John and Bert
B. loans to Bert and Elizabeth
C. loans to Rick, Bert, and Elizabeth
D. All of the loans are subject to the imputed interest rules.
This solution provides the correct answer with explanation to the interest-free gift loans question listed. The appropriate tax code is also referenced.
Taxes with Stocks and Trusts
A) Raquel transferred $100,000 of stock to a trust, with income to be paid to her nephew for 18 years and the remainder to her nephew's children (or their estates). Raquel named a bank as independent trustee but retained the power to determine how much income, if any, will be paid in any particular year. Is this transfer a complete gift? Why Please Explain.
B) This year Gerry's friend, Dewey, was disabled. Gerry paid $15,000 to Dewey's doctor for medical expenses and paid $12,500 to State University for college tuition for Dewey's son. Has Gerry made taxable gifts, and if so, in what amounts?View Full Posting Details