Question: Problem 1 8 - 5 0 ( LO . 5 , 7 ) Frank, Cora, and Mitch are equal shareholders in Purple Corporation. The corporation's

Problem 18-50(LO.5,7)
Frank, Cora, and Mitch are equal shareholders in Purple Corporation. The corporation's assets have a tax basis of $50,000 and a fair market value of $600,000. In the current year, Frank and Cora each loan Purple Corporation $150,000. The notes to Frank and Cora bear interest of 8% per annum. Mitch leases equipment to Purple Corporation for an annual rental of $12,000.
a. Will the shareholder loans from Frank and Cora might be reclassified as equity?

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