You have just met with Joanne Investor. She is the vice-president of Finance with Waterloo Manufacturing Ltd. (WML), a Canadian-controlled private corporation. She has provided you with the following details concerning her current borrowings. 1. She has $100,000 outstanding on her personal residence mortgage held by the Bank of Ontario. The interest rate is 4.75%. 2. She has borrowed $25,000 from the Bank of Ontario to invest in the common shares of a publicly traded company, Underground Airways Inc., that she feels is about to "take off" and realize a large increase in the share price. This company historically has not paid any dividends on its common shares. The interest rate on this loan is 6%. 3. She has a line of credit with her bank that currently bears interest at 5%. From this line of credit, she did the following transactions; (a) She has borrowed $75,000 of this credit to fund the purchase of a parcel of land. This parcel of land is currently vacant, but she hopes to build soon a summer home on the property. (b) She borrowed $20,000 to fund her maximum RRSP contribution for the year. (c) She borrowed $23,500 of the line of credit to purchase a Guaranteed Investment Certificate yielding 4%. She gave the certificate to her 12-year-old daughter. 4. She is one of a group of five senior executives of WML who have been granted options to purchase from the corporation unissued non-voting Class B common shares of the corporation. She presently owns 15% of these shares. In order to assist this group of employees to acquire shares under the stock option plan, WML provides loans at low interest rates under an established policy approved by the Board of Directors. During the year (10th January), she borrowed $30,000 from WML to enable her to exercise some of her stock options. She signed a note promising to repay $6,000 of principal on the anniversary date of the loan in each of the next five years and to pay interest at a rate of 3% per year paid quarterly. The prescribed rates for each quarter in which the loan was outstanding during the year were 5%. Required: Assume full year for your calculations and advise Joanne Investor regarding the tax implications of borrowing from WML (principle amount will be included in the income or not) and the deductibility of the interest paid on each of the above loans. If interest is Non Deductible, there is no need to do calculations, only say Non Deductible. In case of deductible loan, do a calculation for the exact amount of interest on each loan.