On January 1, Year 1, Marge made a $60,000 interest-free loan to her son, Steve, who used the money to start a new business. Steves only sources of income were $50,000 ordinary income from the business and $1,200 of net investment income from a corporate dividend. The relevant federal interest rate was 5%.

(a) What is taxable interest (if any) of this interest-free loan?

(b) What is the net effect of the taxable interest (if any) of the interest-free loan on the Year 1 taxable income of Marge.

(c) What is the net effect of the taxable interest (if any) of the interest-free loan on the Year 1s taxable income of Steve.