On May 1 of this year, Mr. Roberts borrowed from his employer, Stanley Inc., $35,000 evidenced by a 1% promissory note with principal repayable in five equal instalments on the anniversary date and interest payable monthly. Mr. Roberts spent the $35,000 on the following acquisitions:

(1) $10,000 for a second-hand car which he needs to carry out his duties of employment (Approximately 60% of the time);

(2) $5,000 for acquiring dividend-paying common shares in his brother’s corporation; and

(3) $20,000 as a down payment on a new condominium which he moved into immediately.

Assume that the prescribed interest rates for this year are the following:

1st quarter: 2% 

2nd quarter: 1% 

3rd quarter: 3% 

4th quarter: 2%

REQUIRED
Discuss the tax consequences of the above transactions, supporting them with all necessary computations. Ignore the effects of any leap year.