Question 12:

Deerwood Corporation lends its principal shareholder, Lafayette, $515,600 on 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 9%, compounded semiannually. What are the tax consequences of this loan? If required, round to the nearest dollar. Lafayette has of $ and Deerwood has of $ interest income dividend income a return of capital