Vito is the sole shareholder of Vito, Inc. He is also employed by the corporation. On June 30, 2011, Vito borrowed $8,000 from Vito, Inc., and on July 1, 2012, he borrowed an additional $4,000. Both loans were due on demand. No interest was charged on the loans, and the Federal rate was 8% for all relevant dates. Vito used the money to purchase a boat, and he had $1,100 of investment income. Determine the tax consequences in each of the following situations.
The loans are considered employer-employee loans.
In 2011, Vito has _______ additional compensation, and Vito Inc, has ______ of interest income.