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What is the taxable interest of this interest-free loan

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Question - On January 1, Josh loaned his son Seth $100,000, interest-free. Seth uses the money to invest in corporate bonds paying 8% annual interest. Assume that the applicable federal rate of interest is 5%. You may also assume that Seth's net investment income (from a corporate dividend) is $4,000.

What (if any) is the taxable interest of this interest-free loan?

Reference no: EM132138519

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