1. Jasmine made a $60.000 interest-free loan to her son. Farhad, who used the money to start a new business. Farhad's only sources of income were $25,000 from the business and $490 of interest on his checking account. The relevant Federal interest rate was 5%. Based on this information:

1. Jasmine must recognize $3,000 (0.05 $60,000) of imputed interest income on the below-market loan.
2. Farhad's gross income must be increased by the $3.000 (0.05 $60,000) imputed interest income on the below-market loan.
3. Farhad's business net profit will be reduced by $3,000 (0.05 $60,000) of interest expense.
4. Jasmine does not recognize any imputed interest income and Farhad does not recognize any imputed interest expense.

2. In 2022, taxpayer T ("T") exchanged real property held for investment with a fair market value ("FMV" | of $750,000 and an adjusted basis to T of $500,000, for real property held for investment owned by taxpayer S ("S"). The transaction was completed in one day. The FMV of the property owned by S was $730.000. T received the property from S and $20,000 cash in the exchange. What is I's recognized gain, if any, and adjusted basis in the property received from S?

1. $20,000 gain recognized and $500,000 adjusted basis
2. SO gain recognized and $500,000 adjusted basis
3. $20,000 gain recognized and $520,000 adjusted basis
4. $250,000 gain recognized and $750,000 adjusted basis
5. None of a-d is correct