Question

Hal's tax on the imputed interest income from the loan to roy would be $ . roy's tax benefit from the imputed interest expense from hal's loan would be $ . this arrangement would produce an overall cash flow after taxes of $ .
c. which option will maximize the family's after-tax wealth?


d. what is the effect if a zero-interest rate loan would have been made between roy and hal? a zero-interest loan would be possible only if the loan were less than $ , because it would be eligible for the loans. therefore, interest be imputed.

Answer 1

C. Which option will maximize the family’s after-gas wealth?