Jonathan Baxter owns all of the shares of Baxter Ltd. The Company has a December 31 year end. He also works full time as an employee of the business. It is the policy of the Company to provide every employee an interest free loan of up to $30,000 to acquire a vehicle that will be used in their employment duties. The loan must be repaid 3 years after the date of borrowing.
On January 1, 2020, Jonathan borrows $30,000 on an interest free basis. The funds are used to acquire a vehicle to be used in his employment duties. In addition, on July 1, 2020, he borrows $250,000 on an interest free basis in order to assist in the purchase of a new and larger residence. The Company does not provide house acquisition loans to its other employees. The loan will be repaid in full on July 1, 2023. Assume that the prescribed rate for all of 2020 is 2 percent. What are the tax implications of these loans for Mr. Baxter for 2020?

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The Answer of Jonathan Baxter owns all of the shares of Baxter Ltd. The Company has a December 31 year end. He also works full time as an employee of the business. It is the policy of the Company to provide every employee an interest free loan of up to $30,000 to acquire a vehicle that will be used in their employment duties. The loan must be repaid 3 years after the date of borrowing.
On January 1, 2020, Jonathan borrows $30,000 on an interest free basis. The funds are used to acquire a vehicle to be used in his employment duties. In addition, on July 1, 2020, he borrows $250,000 on an interest free basis in order to assist in the purchase of a new and larger residence. The Company does not provide house acquisition loans to its other employees. The loan will be repaid in full on July 1, 2023. Assume that the prescribed rate for all of 2020 is 2 percent. What are the tax implications of these loans for Mr. Baxter for 2020?

Jonathan Baxter Owns All of the Shares of Baxter Ltd