On January 1, Father (Dave) loaned Daughter (Debra) $100,000 to purchase a new car and to pay off college loans. There were no other loans outstanding between Dave and Debra. The relevant Federal rate on interest was 6 percent. The loan was outstanding for the entire year.
a. If Debra has $15,000 of investment income, Dave must recognize $6,090 of imputed interest income.
b. Dave must recognize $6,090 of imputed interest income regardless of the amount of Debra's investment income.
c. Debra must recognize $6,090 of imputed interest income.
d. Debra must recognize $6,090 of imputed interest income if Dave has at least $6,090 of investment income.
e. None of these.
Answer: a