lizabeth made the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans. Assume that the relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year.

Borrower	Amount		Borrower's Net Investment Income			Purpose of Loan
Richard	$2,250		$0			Gift
Woody	$2,700		$525			Purchase stock
Irene	$129,500		$0			Purchase residence

What are the effects of the imputed interest rules on these transactions? Compute Elizabeth's gross income from each loan.

If an amount is zero, enter "0". If required, round your final answer to the nearest dollar.

a. Richard

isis notis not

subject to the imputed interest rules because the $10,000 gift loan exception

doesdoes notdoes not

apply. Elizabeth's gross income from the loan is $fill in the blank 3.

b. The $10,000 exception

doesdoes notdoes not

apply to the loan to Woody because the proceeds were used to purchase

non-income producingincome producingincome producing

assets. Although the $100,000 exception

appliesdoes not applyapplies

to this loan, the amount of imputed interest is $fill in the blank 7. Elizabeth's gross income from the loan is $fill in the blank 8.

c.

The $1,000 exception appliesThe $10,000 exception appliesThe $100,000 exception appliesNone of the exceptions applyNone of the exceptions apply

to the loan to Irene because the loan was for

the purchase of a residencemore than $100,000more than $100,000

. Elizabeth's gross income from the loan is $fill in the blank 11.