What are tax implications of these loans for Ms Jenson

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Question - Ms. Rebecca Jenson is an employee of Jenson Ltd., a large company in which her husband owns 60 percent of the outstanding shares. Ms. Jenson owns the remaining 40 percent of the shares. Jenson Ltd. has a December 31 year end. It is the policy of the Company to provide an interest free loan of up to $25,000 to any employee who wishes to acquire a new home.

On April 1, 2019 Ms. Jenson receives a $25,000 interest free loan from the Company to purchase a new home. This loan is to be repaid in four annual instalments to be made on March 31 of each year.

On the same day, she receives an additional $15,000 interest free loan to purchase furnishings for the home. This loan is to be repaid with one instalment on May 31, 2021.

Assume the prescribed rate for the current year is 2 percent.

Required - What are the 2019 tax implications of these loans for Ms. Jenson?

Reference no: EM132615730

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