Question
Both Albert and Elva own 50% of the stock of Eagle, Inc. (a C corporation). To cover temporary working capital needs, each shareholder loans Eagle
Both Albert and Elva own 50% of the stock of Eagle, Inc. (a C corporation). To cover temporary working capital needs, each shareholder loans Eagle $200,000 using the annual Federal interest rate of 3% and a maturity date of one year.
| a. | What are the tax consequences to Albert, Elva, and Eagle if the loans are classified as debt? |
| b. | What are the tax consequences to Albert, Elva, and Eagle if the loans are classified as equity? |
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Advanced Quality Auditing
Authors: Lance B. Coleman
1st Edition
087389913X, 978-0873899130
