What is the taxable interest of the interest-free loan

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Question: Cook borrows $5,000 from a corporation in which he is a shareholder, interest free, in order to purchase a corporate bond paying 8% interest (assume the purpose of the loan is NOT tax avoidance). The federal rate is still 5%, and Seth's net investment income is now $2,000 (from a corporate dividend). What (if any) is the taxable interest of this interest-free loan?

Reference no: EM131962080

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