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What is the effect of the loan on margarets gross income

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Reference no: EM133310970

Case: Amanda made a $90,000 interest-free loan to her son, Adam, who used the money to retire a mortgage on his personal residence and to buy a certificate of deposit. Adam's only income for the year is his salary of $35,000 and $1,400 interest income on the certificate of deposit. The relevant Federal interest rate is 3% compounded semiannually. The loan is outstanding for the entire year.

  1. Based on the above information, what is the effect of the loan on Margaret's gross income for the year?
  2. Would your answer change if there was an additional loan of $15,000 made to to Adam? Adam used the funds to pay his child's private school tuition. All amounts remains unpaid at that end of this year. Why or why not? You may answer this with a narrative explanation.

Reference no: EM133310970

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