Final answer:
The correct treatment in this scenario is that Dave, the lender, must recognize $6,000 as imputed interest income from the loan to Debra, based on the relevant federal rate of 6%, regardless of Debra's investment income.
Step-by-step explanation:
The question presented is related to the concept of imputed interest income in a familial loan setting, such as the one between Dave and Debra. Imputed interest is the interest that should be charged under the tax law even when no interest or an inadequate level of interest is actually charged in a loan transaction.
Regarding the scenarios provided, they involve understanding the applicable federal rate (AFR) and how it influences tax liability for both the lender and the borrower. The mentioned rate of 6 percent is the AFR that should have been applied to the loan for income tax purposes.
In this case, since the loan was $100,000 at an interest rate of 6 percent, Dave should recognize $6,000 of imputed interest income ($100,000 x 0.06 = $6,000) for the tax year. Debra's investment income would not change this calculation. Therefore, the correct option based on the given information is that Dave must acknowledge the imputed interest income, which would essentially be calculated based on the principal amount of the loan and the relevant federal rate, regardless of Debra's investment income.