Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation
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Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $44,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $5,280 this year if the interest rate on the loan had been set at the prevailing federal interest rate.
Required:
Wally used the funds as a down payment on a speedboat and repaid the $44,000 loan (including $440 of interest) at year-end.
a-1. Does this loan result in any income to either party?
a-2. Indicate the amount below. Assume instead that Pay More forgave the loan and interest on December 31.
What amount of gross income does Wally recognize this year?
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