Example of calculating the taxable benefit
Joshua is your employee. He borrowed $150,000 from you at the beginning of the year. The prescribed rate of interest for the loan is 3% for the first quarter, 4% for the second and third quarters, and 5% for the fourth quarter. Joshua paid you $2,000 interest on the loan no later than 30 days after the end of the year. During the year, a company related to you paid $1,000 interest on the loan for Joshua. Before the end of the same year, Joshua repaid the $1,000 to the company.
|Prescribed interest rate||Loan amount||Part of year||Interest for the period|
The sum of the interest for all four quarters is $6,000.
Calculate the benefit to include in his income as follows:
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