During your review of loans outstanding at year-end, you noted that on January 1, 2020, the corporation
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Question:
- During your review of loans outstanding at year-end, you noted that on January 1, 2020, the corporation loaned $100,000 to the shareholder's spouse in order to buy a luxury car. The shareholder's spouse is an employee of the company and the car is not used for employment purposes. This type of loan is not made available to other employees of the corporation. This loan was not repaid as of December 31, 2021. You also note that the loan bears interest at the prescribed rate, and the interest for the period from January 1, 2021 to December 31, 2021 was paid on January 30, 2018.
- Briefly explain the tax consequences relating to the loan to the shareholder's spouse and if applicable, who is required to report the income. Make sure to describe the exceptions that were met or not met to justify your answer
Related Book For
Auditing Cases An Interactive Learning Approach
ISBN: 978-0132423502
4th Edition
Authors: Steven M Glover, Douglas F Prawitt
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