question b

Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $20,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $2,400 this year if the interest rate on the loan had been set at the prevailing federal interest rate. Required: o. Wally used the funds as a down payment on a speedboat and repaid the $20,000 loan (including $200 of interest) at year end. a-1. Does this loan result in any income to either party? a-2. Indicate the amount below. b. Assume instead that Pay More forgave the loan and interest on December 31 . What amount of gross income does Wally recognize this year? Assume instead that Pay More forgave the loan and interest on December 31 . What amount of gross income does Wally recognize this year