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Stock in Edwards Corporation is held equally by Emily, Louise, and John. Edwards seeks additional capital to buy a valuable tract of land that will

Stock in Edwards Corporation is held equally by Emily, Louise, and John. Edwards seeks additional capital to buy a valuable tract of land that will cost $6,000,000. Emily, Louise, and John propose to loan Edwards $2,000,000 each, taking from Edwards a $2,000,000 10-year note with interest payable annually at five points above the prime rate. Edwards Corporation has current taxable income of $7,000,000. How are the payments on the notes treated for tax purposes? (Hint you do NOT need to know the prime rate to solve).

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