a. Joshua loans his son, Seth, $100,000 interest free for five years. Seth uses the money for a down payment on his home. Assume that the applicable federal interest rate is 4 percent.

a1. What are the tax consequences of this loan to Joshua and to Seth? a2. How would your answer change if Seth uses the money to invest in corporate bonds paying 8 percent annual interest?

c.Sheldon Corporation loans $80,000 interest free for one year to Lynn, an employee. Assume that the applicable federal interest rate is 4 percent. Lynn uses the loan to pay for personal debts. What are the loan's tax consequences for Sheldon and Lynn? How would your answer change if Lynn is a shareholder of Sheldon Corporation?

d.The Board of Directors of CYZ Corporation votes to issue two shares of stock for each share held as a stock dividend to shareholders. Just prior to the dividend, Cheryl owns 100 shares of CYZ Corporation stock that she purchased for $10 per share. She receives 200 new shares as a result of the dividend. How much gross income must Cheryl report as a result of the dividend and what is her stock basis per share the dividend?