On January 1, Donald loaned his daughter, Ivanka, $90,000 to purchase a new personal residence. There were no other loans outstanding between Donald and Ivanka. Ivankas only income was $30,000 salary and $4,000 interest income. Donald had investment income of $200,000. Donald did not charge Ivanka interest. The relevant federal rate was 9%.

For the current year: Ivanka must recognize $8,100 (0.09 x $90,000) imputed interest income on the loan.

Donald must recognize imputed interest income of $4,000.

Donald must recognize imputed interest income of $8,100.

Ivanka is allowed a deduction for imputed interest of $8,100.