On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the money to pay off the $40,000 mortgage on his personal residence and also to buy a $50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000 and $8,100 Federal I- BOND interest income on the certificate of deposit (9% WOW!). The relevant Federal interest rate is 3% compounded semiannually. The loan is outstanding for the entire year. Based on the above information, what is the effect of this loan on Patti's gross a.
On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the money to pay off the $40,000 mortgage on his personal residence and also to buy a $50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000 and $8,100 Federal I- BOND interest income on the certificate of deposit (9% WOW!). The relevant Federal interest rate is 3% compounded semiannually. The loan is outstanding for the entire year. Based on the above information, what is the effect of this loan on Patti's gross a.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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3.
Transcribed Image Text:4. On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the
money to pay off the $40,000 mortgage on his personal residence and also to buy a
$50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000
and $8,100 Federal I- BOND interest income on the certificate of deposit (9% WOW!).
The relevant Federal interest rate is 3% compounded semiannually. The loan is
outstanding for the entire year.
a.
Based on the above information, what is the effect of this loan on Patti's gross
income for the year?
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