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What are the effects of the loan on Wardas gross income

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Question - Warda made a $90,000 interest-free loan to her son, Ibrahim, who used the money to buy a certificate of deposit. Ibrahim's only income for the year is his salary of $35,000 and $2,400 interest income on the certificate of deposit. The relevant Federal interest rate is 6%. The loan is outstanding for the entire year (2019).

Required -

1) Based on the above information, what is the effect of the loan on Warda's gross income for the year?

2) The facts are the same as above, except you discovered that Warda had made an additional loan of $15,000 to Ibrahim in the previous year. Ibrahim used the funds to pay his child's private school tuition. What are the effects of the loan on Warda's gross income?

Reference no: EM132526484

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