Billy's father owns a controlling interest in Big Top Corporation.Billy needed $20,000 to pay a gambling debt and the corporation made a loan to Billy at no interest for the $20,000.This transaction can be characterized as:
A)A gift loan to Billy
B)An employment-related loan
C)An arm's length loan
D)A disguised dividend to the father

Question

Quizplus · Accepted Answer

The loan can be seen as a disguised dividend to the father because Billy's father has a controlling interest in the corporation, and the interest-free loan benefits his son, which indirectly benefits him.

Billy's Father Owns a Controlling Interest in Big Top Corporation