Vito is the sole shareholder of Vito, Inc. He is also employed by the corporation. On June 30, 2016, Vito
Vito is the sole shareholder of Vito, Inc. He is also employed by the corporation. On June 30, 2016, Vito borrowed $8,000 from Vito, Inc., and on July 1, 2017, he borrowed an additional $10,000. Both loans were due on demand. No interest was charged on the loans, and the Federal rate was 4% for all relevant dates. Vito used the money to purchase a boat, and he had $2,500 of investment income. Determine the tax consequences to Vito and Vito, Inc., in each of the following situations:
a. The loans are considered employer-employee loans.
b. The loans are considered corporation-shareholder loans.
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