49.   LO.4 Indicate whether the imputed interest rules should apply in the following sit- uations. Assume that all of the loans were made at the beginning of the tax

year unless otherwise indicated.

a.      Mike loaned his sister $90,000 to buy a new home. Mike did not charge interest          on the loan. The Federal rate was 5%. Mike’s  sister  had  $900  of  investment  income  for  the  year.

b.     Sam’s  employer maintains an emergency loan fund for its employees. During    the year, Sam’s wife was very ill, and he incurred unusually large medical expenses. He borrowed $8,500 from his employer’s emergency loan fund for     six months. The Federal rate was 5.5%. Sam and his wife had no investment  income  for  the year.

c.      Jody borrowed $25,000 from her controlled corporation for six months. She used the funds to pay her daughter’s college tuition. The corporation charged Jody 4% interest. The Federal rate was 5%. Jody had $3,500 of investment income for the year.

d.     Kait loaned her son, Jake, $60,000 for six months. Jake used the $60,000 to pay off college loans. The Federal rate was 5%, and Kait did not charge Jake any in- terest. Jake had dividend and interest income of $2,100 for the tax year.