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Cooper Corporation loans $200,000 interest free to Sandy, an employee. Sandy uses the loan to pay personal debts. Assume the applicable federal rate is 6%.

Cooper Corporation loans $200,000 interest free to Sandy, an employee. Sandy uses the loan to pay personal debts. Assume the applicable federal rate is 6%.

A. What are the loans tax consequences (both income and deductions) to Cooper Corporation and Sandy? Please show your work and explain your calculations.

B. Assume Sandy is a shareholder in Cooper Corporation (rather than an employee). What are the loan tax consequences to Cooper Corporation and Sandy? Please show your work and explain your calculations.

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