Assume that during the third and fourth quarters of 2011, Ask an Expert

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On July 1, 2011, Sam Confrey received a five year, $50,000 loan from his employer. The loan was intended to assist Sam with the purchase of a home in his new employment location. The new home is 47 kilometers closer to Sam's new work location. The interest rate on the loan was 3 percent. Assume that during the third and fourth quarters of 2011, the relevant prescribed rate of interest is 4 percent. The effect of this transaction on his Taxable Income would be:

a) An increase of $250.

b) An increase of $500.

c) An increase of $750.

d) An increase of $2,000.

e) No change.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M973173

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