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Deerwood Corporation lends its principal shareholder, Lafayette, $1459000on July 1 of the current year. The loan is interest-free and payable on demand. On December 31,

Deerwood Corporation lends its principal shareholder, Lafayette, $1459000on July 1 of the current year. The loan is interest-free and payable on demand. On December 31, the imputed interest rules are applied. Assume that the Federal rate is 7%, compounded semiannually.

What are the tax consequences of this loan?

Lafayette has (dividened income, interest income, return of capital) of $______ and Deerwood has ( a dividend payable, interest expense, interest income) of $______

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