Chana made a $75,000 interest-free loan to her son,Trey,who used the money to retire a mortgage on his personal residence.Trey's only source of income was salary of $50,000 and $940 interest income on a savings account.The relevant Federal interest rate was 5% and the loan was outstanding all year long.What amount must Chana include as interest income as a result of this transaction?

Question

Quizplus · Accepted Answer

Since the loan is interest-free and Trey’s total investment income is less than $1,000, the de minimis exception applies, and Chana does not need to report any imputed interest income.

Chana Made a $75,000 Interest-Free Loan to Her Son,Trey,who Used