Luma, who works for Microsoft Corp and owns 10,000 shares of American Airlines borrowedthe following amounts:
A) $50,000 from her father at no interest.
B) $80,000 from Microsoft Corp at no interest.
C) $60,000 from American Airlines at no interest
Assume the applicable federal rate is 4 percent.
Required: (14 points)
a. Explain the tax consequences (for both Luma and the lenders) of this loans if Luma uses themoney for a vacation.
b. How would your answer change if Luma uses the money to invest in bonds paying 6percent interest?

Answer rating: 100% (QA)

a Tax consequences of the loans if Luma uses the money for a vacation Luma Luma will have to impute ... View the full answer