Sharon made a $60,000 interest-free loan to her son, Todd, who used the money to start a new business. Todd's only sources of income were $25,000 from the business and $490 of interest on his checking account. The relevant Federal interest rate was 5%. Based on the above information:a. Todd's business net profit will be reduced by $3,000 (.05 * $60,000) of interest expense. b. Sharon must recognize $3,000 (.05 * $60,000) of imputed interest income on the below - market loan. c. Todd's gross income must be increased by the $3,000 (.05 * $60,000) imputed interest income on the below market loan. d. Sharon does not recognize any imputed interest income and Todd does not recognize any imputed interest expense. e. None of the above is correct.
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