Janine's Employer Loaned Her $5,000 This Year (Interest-Free)to Buy a Used

Janine's employer loaned her $5,000 this year (interest-free) to buy a used car. If the federal interest rate was 4 percent, which of the following is correct?

A) Janine recognizes $200 of taxable interest income.
B) Janine's employer recognizes $200 of deductible interest expense.
C) Janine recognizes $200 of imputed compensation income.
D) Janine recognizes $200 of imputed dividend income.
E) None of the choices are correct.

Correct Answer:

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