Patrick paid $52,000 to his son David to provide some assistance in his newly started business. They agreed that David repay his father $58,000 at the end of five years. Patrick provided this loan to David without any formal agreement or security deposit for the sum lent. Patrick told his son that he need not pay interest. However, David repaid the full amount after two years through a cheque, which was included an additional amount equal to 5% on the amount borrowed. By referring to relevant statutory and case law, you need to discuss the effect of these arrangement on the assessable income of Patrick. (5 marks)
| Amount of Loan | $ 52,000 | |
| Interest Rate | 5% | |
| Amount Repaid after the end of 2nd Year | $ 57,330 | ($ 52,000*1.05*1.05) |
| Interest Paid | $ 57,330-$ 52,000=$ 5,330 | |
| David pay interest of $5,330 to Patrick, and it will be taxable in the hand of Patrick under the head Income from Other Source | ||
Patrick paid $52,000 to his son David to provide some assistance in his newly started business. They agreed that David r...
Urgent Help!! Patrick paid $52,000 to his son David to provide some assistance in his newly started business. They agreed that David repay his father $58,000 at the end of five years. Patrick provided this loan to David without any formal agreement or security deposit for the sum lent. Patrick told his son that he need not pay interest. However, David repaid the full amount after two years through a cheque, which was included an additional amount equal to 5%...
Comprehensive Income Tax Course: Module 1 4. Randy turned 16 last year and had his first summer job. Even though his parents are claiming him as a dependent he wants to file a return in order to get his refund. He receives his W-2 and decides he can do his own return using form 1040-EZ. Which of the following information is not found on a Form W-2? a) The taxpayer’s Social Security number b) The taxpayer’s wages, tips and other...