Sharon made a $60,000 interest­free loan to her son, Todd, who used the money to start a new business. Todd’s only sources of income were $25,000 from the business and $490 of interest on his checking account. The relevant Federal interest rate was 5%. Based on the above information: None of the above is correct. Sharon must recognize $3,000 (.05 × $60,000) of imputed interest income on the below- market loan. Todd’s business net profit will be reduced by $3,000 (.05 × $60,000) of interest expense. Sharon does not recognize any imputed interest income and Todd does not recognize any imputed interest expense. Todd’s gross income must be increased by the $3,000 (.05 × $60,000) imputed interest income on the below market loan.