On January 1, Father (Dave) loaned Daughter (Debra) $100,000 to purchase a new car and to pay off college loans.There were no other loans outstanding between Dave and Debra.The relevant Federal rate on interest was 6 percent.The loan was outstanding for the entire year.

Question

Quizplus · Accepted Answer

According to the relevant Federal rate on interest of 6 percent, the imputed interest income on the loan would be $6,000. However, the imputed interest income is also affected by the amount of investment income earned by Debra. As Debra has $15,000 of investment income, the imputed interest income for Dave would be $6,090 ($6,000 + 1.72% x $15,000). Therefore, choice A is the best answer.

On January 1, Father (Dave) Loaned Daughter (Debra) $100,000 to Purchase