Sharon Made a $60,000 Interest-Free Loan to Her Son, Todd

Sharon made a $60,000 interest-free loan to her son, Todd, who used the money to start a new business.Todd'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) Todd's business net profit will be reduced by $3,000 (0.05 × $60,000) of interest expense.
B) Sharon must recognize $3,000 (0.05 × $60,000) of imputed interest income on the below-market loan.
C) Todd's gross income must be increased by the $3,000 (0.05 × $60,000) imputed interest income on the below- market loan.
D) Sharon does not recognize any imputed interest income and Todd does not recognize any imputed interest expense.
E) None of these is correct.