On January 1, Year 1, Bill makes a $10,000 loan to Maurice, payable on demand. Assume the loan is a bona fide loan evidenced by appropriate documentation. On the day Bill made the loan, and throughout the time the loan was outstanding, the applicable Federal rate was 10 percent compounded semi-annually. Under the terms of the loan, Maurice is required to pay only five percent simple interest annually. Explain the Year 1 consequences of this loan to Bill and Maurice if Bill is Maurice's employer and the loan is made for employment reasons. Assume the loan remains outstanding throughout Year 1.

Answer rating: 100% (QA)

There are several consequences of Bills loan to Maurice to consider depending on various aspects of the employeremployee relationship and the purpose ... View the full answer