In December 2008, Arcor Co.advanced funds of $200,000 to Mr.Jones, a new employee of the corporation, to assist him in acquiring a residence when he moved from Newfound- land to commence employment in British Columbia.The loan bears no interest and is to be repaid in full on December 31, 2013.The prescribed interest rate at the time of this ad- vance was 5 percent.Assuming that the prescribed interest rate throughout 2011 was 6 percent, which one of the following represents the increase in Mr.Jones's Taxable Income in 2011 due to this loan?

Question

Quizplus · Accepted Answer

The prescribed interest rate is 6% and the loan amount is $200,000. The imputed interest is $200,000 x 6% = $12,000. The increase in Mr. Jones's Taxable Income in 2011 is $12,000 - $2,250 = $9,750.