Which of the following interest-free loans is subject to the imputed interest rules (i.e., interest must be imputed on the loan)?
I.Benito loans $250,000 to his son. His son uses the money to open a new business. During the current year, the business shows a loss and his son has no other sources of income.II.Bisbane Corporation loans $8,000 to its principal shareholder. The shareholder uses the funds to buy additional shares of stock in Arcane. The shareholder is deemed to receive $4,000 of dividends from Brisbane during the year.?
A. Only loan I
B. Only loan II
C. Both loans
D. None of the two loans
Answer: A
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