Question

Vito is the sole shareholder of Vito, Inc. The corporation also employs him. On June 30, 2014, Vito borrowed $8,000 from Vito, Inc., and on July 1, 2015, he borrowed an additional $10,000. Both loans were due on demand. No interest was charged on the loans, and the Federal interest rate was 4% for all relevant dates. Vito used the money to purchase a boat. Elsewhere on his return, Vito recognized $2,500 of investment income. Determine the tax consequences to Vito and Vito, Inc., if:
a. The loans are considered employer-employee loans.
b. The loans are considered corporation-shareholder loans.


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  • CreatedMay 25, 2015
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