Patrick paid $52,000 to his son David to provide some assistance in his newly started business. They agreed that David repays his father $58,000 at the end of five years. Patrick provided this loan to David without any formal agreement or security deposit for the sum lent. Patrick told his son that he need not pay interest. However, David repaid the full amount after two years through a cheque, which was included an additional amount equal to 5% on the amount borrowed. By referring to relevant statutory and case law, you need to discuss the effect of this arrangement on the assessable income of Patrick.

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Amount of loan 52000 Amount paid at the end of 2 ... View the full answer