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.

Wally used the funds as a down payment on a speedboat and repaid the $20,000 loan (including $200 of interest) at year-end.

Does this loan result in any income to either party? O Yes O No

Indicate the amount below.

	Gross Income
Pay More	?
Wally	?