During the year, T borrowed $7,000 from his wholly owned corporation.The loan was interest-free.Under the operable Code section, T will automatically be deemed to have received a dividend for the interest that he was not charged.

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Under the Internal Revenue Code, an interest-free loan from a corporation to a shareholder can result in a deemed transfer of wealth, but it is not automatically treated as a dividend. The treatment depends on various factors, including the purpose of the loan and whether it is considered a bona fide loan with a repayment plan. The IRS may recharacterize it as a dividend, compensation, or another form of distribution based on the facts and circumstances, but this is not an automatic process.

During the Year, T Borrowed $7,000 from His Wholly Owned