1.Stock in Boland Corporation (555 Pinewood Lane, Duncan, AL 73336) is held equally by Linda, Lester, and John. Boland seeks additional capital in the amount of $900,000 to construct a building. Linda, Lester, and John each propose to lend Boland Corporation $300,000, taking from Boland a $300,000 four-year note with interest payable annually at two points below the prime rate. Boland Corporation has current taxable income of $2 million. How are the payments on the notes treated for tax purposes?

Questions:

I want to confirm if the interest payment is deductible to the corporation and taxable to Linda, Lester and JOhn.